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THE UNIVERSITY 
OF ILLINOIS 
LIBRARY 


456.2. 
Reo 


Return this book on or before the 
Latest Date stamped below. A 
charge is made on all overdue 


books. 
U. of I. Library 


8057-S 


LYMAN STEWART 
1840-1923 


Pioneer of the California oil industry; born near 
Titusville, Pa., July 22, 1840; died September 28, 
1923. He preceded Mr. Rockefeller two years in 
entering oildom, and at the time of his death was 
chairman of the board of directors of the Union Oil 
Co., of California, which he founded and with which 
the author was once connected. Among his. more 
notable beneficiaries is the extensive Bible. Institute 
of Los Angeles. 


a ee 
— oh | 


OILDOM 


ITS TREASURES AND TRAGEDIES 


; A PROFUSELY ILLUSTRATED BOOK OF LATE 
AND BASIC FACTS ABOUT PETROLEUM AND THE 
DEPENDENT OIL AND AUTOMOTIVE INDUSTRIES 


POPULARLY PRESENTED FOR THE BENEFIT OF INVESTORS, MOTORISTS 
AND OPERATORS 


By Oscark H. REINHOLT, B. S. 


Engineer and Geologist; Specialist in Mineral Resources; Fuel Explorer in the 
Philippines for the War Dept., 1903-4; Co-Editor, Revised “Manual for the 
Oil and Gas Industry,” U. S. Treasury Department, 1921; Chief, Depart- 
ment of Mines and Metallurgy, Sesquicentennial Exposition, 1926; 
Professor of Chemistry and Geology, Hartwick College, 1929-30 


) 
25 (93 


A 
a) 
PARWONE 
Covering International Phases, Natural History, Commercial Geology, 


Mechanism, and Economic Relations of Crude Oil, Gasoline 
and the Automotive Industry 


David McKay Co., Publishers 
South Washington Square, Philadelphia 


Part Ones 1519, 


= Part Two, 1927 


a pea Re 


Tid 
uly 


a ; Sr 


pp 


OUTLINE OF CONTENTS—PART ONE p-! 


I. THE PETROLEUM PANORAMA—International Treasures and Tragedies, 
Turkish Petroleum and the Open Door, Averting Another Tragedy, Advantage of 
Latin America, Engineers as Diplomats, Restrictions on American Enterprise 
Abroad, World Reserves and Present Sources, American Dominance, Why Other 
Nations Seek Own Supplies, Domestic Position of Mineral Oil. 

Il. The NATURAL RESOURCE—Nature, Origin of Oil, Surface Signs of 
Deposits, Geologic Occurrence and Distribution, Geologic Treasures and Tragedies. 


Il. COMMERCIAL GEOLOGY—Description of the Major American Fields: 


“Mid-Continent, California, Gulf Coast, Appalachian, Rocky Mountains, Illinois and 


Lima-Indiana, Canadian Occurrence and Development, Summary of Salient Facts. 


IV. MECHANISM OF THE INDUSTRY — Technologic Foundations and 
Dearth of Petroleum Engineers, Conservation of Underground Reserves, Three 
Great. Problems, The Tragedy of Poor Recovery, Conservation of Capital Through 
Core Drilling, Developing, Producing, Transporting and Refining; Technologic 
Treasures, 

V. ECONOMIC ASPECTS—Inmportance and History, Problems and Prelimin- 
aries, Production ‘of Crude Oil, Peak and Economic Limit, Yield Per Acre and Per 
Well, Overproduction from Deep Wells, Tragic Consequences. 


VI. ECONOMIC ASPECTS (continued)—Price Changes and Market Panics, 
Premiums, Causes and Cures for Overproduction, Storage and Stabilization, Manu- 
facturing and the Refined Products, Costs and the ‘‘Soup-bone” Tragedy, Rate of 
Refining, Transportation by Tank Cars, Pipe Lines and Tankers, Distribution and 
Utilization, Tragic Loss of Lubricants, Coal versus Fuel Oil, Conservation. 


VII. GASOLINE AND THE AUTOMOTIVE INDUSTRY — Three Sources, 
Growth in Yield, Use and Stocks; Alcohol, Benzol and Other Substitutes; Conserva- 
tion of Motor Fuel; Practical Economics for Auto Owners; Treasures and Tragedies. 


PUBLISHER’S STATEMENT—PART TWo - /9 7 


Lovers of truth like a book of this type which is both entertaining and instruc- 
tive. Part One is aimed at the man with the car; Part Two, at the man with the 
money; both parts, at the man within the oil industry who wants to advance in 
the field, in the refinery or from the filling station. How well and widely Part 
One was received is clearly indicated by the comments abstracted at the end of 
the 12-page index. Not only is the complete book readable and serviceable as a text 
but it is particularly useful for reference because of its wide range of subjects and 
the minute division of its content. It is easier to list its omissions—largely legal 
and technical—than its inclusions since it is so encyclopedic and takes the place 
of half-a-dozen separate volumes on petroleum. This annual should have a place 
on the shelf of every banker, bond dealer and other investment adviser. It should 
interest all intelligent Americans wanting important facts about one of the world’s 
international problems. It is also commended to all law-makers who may have to 
consider petroleum legislation. 


Philadelphia, Sept. 1, 1927. 


PROVISIONAL SUPPLEMENT TO PARTS ONE AND TWO * 


A truce has been declared in the world struggle for oil. But the third oil 
producer, Russia, is still reluctant as to indemnifying British investors: and 
Venezuela, now the second nation since Mexico’s decline, has discouraged new 
development to the point that one American operator (Gulf Oil) has withdrawn 
therefrom. Persia is now pressing Mexico for fourth place and Colombia is com- 
ing up, having now about twice the output of Peru, or about the same as the 


* PART TWO, of 270 pages and 150 illustrations, covered Finance, Geography, Govern- 
mental Relations, the Human Element, Latin America and the Prevention of Frauds and 
Failures. Crowded out of it was the humorous chapter entitled “Laughing Gas and Lubri- 
cations” which will appear in the forthcoming PART THREE. That supplement will more 
completely present the important facts about mineral oil and the petroleum industry as 
they pertain to the years 1927, 1928 and 1929. 


V4L719 


Dutch East Indies, or almost as much as Rumania. The billion-barrel yield in 
the United States boosted world production to 1,450 million barrels in 1929. 


RECENT GROWTH IN THE PRODUCTION OF PETROLEUM IN THE UNITED STATES 


Year Million BblIs. Mil. Dols. Ist State Year Million Bbls. Mil. Dols. 1st State 
1924 714 1,023 Calif. 1927 901 yb Okla. 
1925 764 1,285 Calif. 1928 902 1,100 s Texas 
1926 igi 1,448 Calif. 1929 1,000 1,250 Texas 


Stocks of all kinds reached a new record of about 680 million barrels at the 
end of the year. Gasoline production approximated 440 million barrels, of which 
56 per cent was from straight run or ordinary refining, 33 per cent from cracking, 
and 11 per cent from vapors of oil wells and natural gas. If the 52 million barrels 
of such natural gasoline be added to the quantity of crude oil, the total liquid 
mineral fuel produced in 1929 makes 1,058 mil. bbls., 70 per cent of the world’s. 


RANK OF 18 STATES IN OUTPUT OF CRUDE OIL IN 1929 AND TO DATE 
(Millions of barrels of 42 gallons) 


State 1929 Total State 1929 Total State 1929 Total 
TEXAS Ate ase 299 2,075 Wyoming ..... 19.2 315 Michigan ..... 4.4 5.0 
California -.... 293 3210 Pennsylvania . 11.8 825 New York Be: 75. 
Oklahoma .... 254 ‘2,770 Kentucky 7.8 105 Montana ..... 3.2 30. 
FEA TSAS Ove crite oe 43 510 ODIO er ee 6.7 555 Colorado... 2:3 23: 
ATKANSAS) ii hs 25 340 Illinois vaMeOco 385 New Mexico .. 1.7 8. 
Lowlsianay, yi. 20 425 Wee VIL eine e. a eos 370 Indian ae wees 1.0 117. 


Early in 1930, the three leading oil areas were the Los Angeles basin, the 
West Texas (Permian) basin and the Seminole (Okla) district. The daily rates 
of these ranged from 300,000 to over 400,000 barrels. Curtailments, notably in 
the first of these, have reduced the daily yield in the United States from nearly 
3,000,000 barrels about Sept. 1, 1929, to less than 2,650,000 barrels on Jan. 1, 1930, 
or an average rate of almost 8 barrels per well per day. 

Remarkable are the new records established in deep drilling and in production. 
Wells are now being bored in the Los Angeles basin to depths beyond 9,500 feet, 
using electric power and rotary tools. The deepest producer in the Mid-Continent 
field was drilled with cable tools to 8,532 feeet in Reagan County, West Texas. 
It came in at Thanksgiving, 1928, flowing 80 bbls. daily. In two months it paid 
for itself and increased to 2,000 bbls. and to 55 per cent gasoline. California’s 
7,000-foot wells at Santa Fe Springs, Long Beach, Ventura (page 151), and especi- 
ally in the Kettleman Hills (San Joaquin Valley), are likewise yielding light oil. 
The last named field promises to produce more oil than any other field in the world. 

As a result of all this deep development, the weighted average depth (page 
105) of production has “risen” to about % of a mile. The aggregate depth of our 
1-3 million wells approximates the distance to the Moon. The cost of drilling and 
lifting has increased enormously and now exceeds $1,200,000,000 per annum. Rela- 
tively shallow wells in West Texas, some with over 130,000 bbls. initial per day, 
have proven bonanzas to their owners and have broken the records of the Lucas 
(page 41) and the Lakeview (151) gushers. If allowed to flow to capacity, they 
could have boosted the daily average in 1928 to more than 20 bbls. per well. 

Exports of refined products, notably gasoline, are advancing in volume and 
value. But because of the enormous expansion in world demand for American 
automobiles, mineral oils no longer rank next to cotton among our exports, meas- 
ured in money. They average about $500,000,000 worth per annum and make 
about 10 per cent of total exports. Los Angeles and New York are the two leading 
oil ports, considering both coastwise and foreign trade. At all the other six or 
seven. leading sea~ports, petroleum remains preeminent as to tonnage in all trade. 

Despite continued domestic competition, evidenced by the overbuilding of 
filling stations and the extension of household heating with oil, the operators are 
prosperous and are gradually agreeing on unit development of new pools in line 
with what Henry L. Doherty has advocated for years. The U. S. Oil Conservation 
Board, appointed by President Coolidge on Dec. 19, 1924, is harmonizing Federal 
activities in cooperation with state authorities and the leaders in the industry 
itself. Water-drive in New York and Pennsylvania and air-lift elsewhere are. 
increasing the recovery of oil per acre and per well. 


Hartwick College, Oneonta, N. Y., Feb. 10, 1930. 


PREFACE 


“Conservation of Capital’ is the key-note of this little contribution 
to petroleum literature. The conservation of the natural resources in oil 
and gas has already received proper consideration in various publications. 
As a result of the co-operation of the United States Geological Survey and 
the Bureau of Mines with wide-awake operators the former woeful waste 
of these natural treasures has been remarkably reduced. With the rapid 
growth of the oil industry during the last decade redoubled efforts have 
been exerted by other Government agencies to discourage the evil prac- 
tices of oil promoters and pseudo-geologists. Uncle Sam, however, neither 
can nor will take away the personal liberty of being humbugged. 


During the past five years an average of almost 150 million dollars 
has been annually lost more or less honestly, but not always unavoidably, 
in unsuccessful drilling for petroleum. No one presumes to know exactly 
how much additional good money has gone overboard in the storms of 
stock and lease speculations; but very likely at least twice that sum was 
thus lost during the boom year of 1919. Three dollars for each man, 
woman and child in the United States does not seem so appalling as it 
would be if the loss were distributed at the rate of $300 each among one 
million “investors.” This estimate in the aggregate was actually under 
10 per cent of the 3 3-4 billion dollars total authorized capital of the 1629 
oil companies organized throughout our country in 1919; but it actually 
approximated the entire output of all the world’s gold mines in any recent 
year. 


The Treasures and Tragedies of Petroleum are numerous, notable, 
and varied. The famous asphalt deposits of Rancho La Brea near Los 
Angeles have proven a veritable treasure vault to science. The embalmed 
bones of camels, elephants, lions, and saber-tooth tigers found there 
represent a geologically recent tragedy of rare occurrence in nature. As 
a treasured commodity of international trade, petroleum would not yet 
have yielded its comforts and conveniences to man were it not for the 
treasure seekers, intrepid geologists, and patient technologists, who, in 
their various ways have pioneered and improved the greatest branch of 
the American mining industry. Treasures in the form of income to 
royalty owners, stockholders, and employes are all self-evident. Not to 
be overlooked, however, are the many public improvements and benefac- 
tions that have helped to advance civilization and have derived their funds 
from the oil industry. Suffice it here to mention one—the Rockefeller 
Institute for Medical Research which has reached even to China with its 
helping hand. Two great tragedies are “‘portrayed in oil,” respectively in 
the picture of a motorless America a hundred years hence and in the real- 
ization that human parasites steal millions each year and drive many in- 
vestors to suicide. 


How to avert the one of these tragedies by providing intelligent in- 
vestors with means for their own protection against misadventure in oil, 


(5) 


has been the main motive in preparing this book. The latest and most re- 
liable information on mineral oil and the dependent industries has been 
collected, classified, and condensed for the benefit of both the investor and 
the general reader. Some money-saving advice is given to the many in- 
vestors and other readers who are also motorists. This, together with 
late statistics of the automotive industry supplement the chapters on Eco- 
nomics. The economic and other treasures of the motor car are quite 
obvious but facts about avertible tragedies must needs be told effectively. 
The attempt has been made to present the serious facts in a brief and 
popular form; just a little has been added in a lighter vein for entertain- 
ment and good measure. Practically all the topics taken up have been 
treated more deeply in publications to which references have been made. 
Interested readers are invited to suggest improvements for future editions. 
They may be mailed to the author, in care of the Chamber of Mines and 


Oil, Los Angeles, California, or the Technical Research Institute, 601-5 
Star Building, Washington. 


OSCAR HALVORSEN REINHOLT. 
Washington, D. C., Jan. 16, 1924. 


ACKNOWLEDGMENTS 


The principal inspiration truthfully to portray the oil business as it is today has 
come from contact with scientific workers in Washington and with Natural Resources 
cases of the Income Tax Unit that imply a ridiculously low percentage of success 
among the many American oil companies that have been organized. The surcharging 
of the atmosphere at the Capital, not with factory fumes, but with unburned carbon, 
carbon-monoxide and gasoline vapor from the exhaust of automobiles in the down- 
town district, has led the author to devote special space to the subject of gasoline 
and its waste in an effort to help save hundreds of millions yearly misspent. 

Individual thanks are herewith extended to those men who have contributed 
material or otherwise encouraged the writer: Mr. P. EH. Barbour, Assistant Secretary, 
American Institute of Mining Engineers; Commissioner Burke and Mr. T. B. Boone, 
an attorney, of the Indian Bureau; Major W. DuB. Brookings, of the U. S. Chamber 
of Commerce; Secretary J. F. Callbreath, of the American Mining Congress; Mr. A. H. 
Fay, former associate of the author in the Oil and Gas Section and for two years 
head of the Natural Resources division in the Bureau of Internal Revenue; Mr. J. C. 
Fitzsimmons, sales manager of the leading producer on the Pacific coast; Mr. J. O. 
Jenson, banker and former oil operator, of Clifton, Texas; Mr. G. E. Mitchell, mem- 
ber of the U. S. Geological Survey and writer for the Scientific American; Messrs. H. C. 
Morris, chief, and A. T. Coumbe, Jr., assistant chief, Petroleum division of the 
Department of Commerce; Dr. W. H. Raymenton, naturalist, of Worcester. Mass., and 
San Diego, Calif.; Mr. W. A. Reid, foreign trade adviser, Pan American Union; Mr. 
A. H. Redfield, of the Foreign division of the Survey; Mr. G. B. Richardson, chief 
of the Petroleum division of the survey; Mr. W. W. Orcutt, vice-president of the 
Union Oil Company, of California; Secretary G. M. Swindell, of the California 
Chamber of Mines and Oil, Mr. H. T. Walsh, vice-president of the Sullivan Machin- 
ery Co., Chicago; Mr. David White of the Survey; and also the publishers of the 


various books and periodicals who have been specially credited for illustrations or 
quotations reproduced. 


(6) 


OIL DOM: 
ITS TREASURES AND TRAGEDIES 
By Oscar H. REINHOLT 


Pre Rela OINsE 
CHAPTER I. THE PETROLEUM PANORAMA 


“While our Government has been trying to organize a model state of society, 
other great states have been looking about for the means to dominate the petroleum 
production of the world, because of their conviction that in the control of petroleum 
they might find the power to control the commerce, the trade, amd the industry of the 
twentieth century world.”—Warren G. Harding, 1920. 

International Treasures and Tragedies. The very great and growing 
importance of petroleum throughout the world is being emphasized by cur- 
rent events. The year 1923 has been full of happenings that prove how 
essential mineral oil has become to our industrial life and how involved 
it is with international commerce and politics. Not only have the daily 
newspapers been deluged with long 
news items, but certain popular 
magazines have devoted page upon 
page to reviews of various oil situa- 
tions.* Pessimistic writers have 
even prophesied that the next world 
war will be fought for the posses- 
sion of oil deposits as the last one 
was instigated by Germany’s greed 
for greater resources in coal and 
iron ore. 


The Chester concession,** relat- 
ing in part to the Mosul region of 
Kurdestan, is a late affair to re- 
ceive public attention. Interest 
therein has been aroused because of 
the spreading realization that from 
foreign sources must be taken more 
and more of the future supply of pe- 

troleum to meet the varied and 
To whom the Turkish Government has : : 
erauied areal, iconcéssionsy in. Asia voracious demands of America for 

Minor. (See map, page 9.) lubricants and liquid fuels. 


Other International Petroleum Problems. Among other affairs with an 
oily flavor may be mentioned the recognition of Russia’s misgovernment 


REAR ADM. COLBY M. CHESTER, 
U.S, N: 


4 Minee: especially, “World Race for Oil,’”’ The Literary Digest, January, 1923, and 
“Civilization and Oil,” by Leo Pasvolsky, Atlantic Monthly, February, 1923. 
**Seventeen years after meeting the Admiral at the 8th International Geographic 
Congress, the author heard him describe the Kurdestanian fields. In the course of 
his lecture he credited David White of the Geological Survey with broadcasting the 
facts which explain why our country must seek foreign supplies. See ‘The Import- 
ance of Mosul in the Oil World,’’ Current Opinion, June, 1923; and “Berlin to Bag- 
dad and the Chester Plan,” J'he Nation’s Business, July, 1923. 


(7) 


8 OILDOM: ITS TREASURES AND TRAGEDIES 


which depends so much upon the restoration of petroleum rights to foreign — 
interests that have developed Baku and lesser fields. The recent recogni- 
tion of the Obregon government was deferred by the United States until 
the dark clouds of confiscation had been dissipated to the satisfaction of 
American owners of Mexican oil lands. 

Perhaps it is providential, for the good of civilization, that two fair- 
minded nations together so largely monopolize the earth’s resources, pro- 
duction and commerce not only in petroleum but also in gold, iron, coal, 
copper, cotton, wheat and wool. According to Barron’s* “England has the 
lines of world communication and dominion in colonial administration and 
upbuilding. English capital and credit is being allied with American 
capital and management in a world’s steel development. Foundations are 
being put under the peace of the world that mean much for world de- 
velopment. Whatever may be the appearance of local friction, Great 
Britain, the United States, France and Italy are moving forward in closer 
co-operation than is locally realized. ‘The Mediterranean is a pivotal 
point in that co-operation and that future development.’’ 

Americans and Turkish Petroleum. The long diplomatic contest 
between France and England for the petroleum of the Mosul area in the 
upper Tigris region, which has been one of the dominating though 
underlying factors in various conferences, from Rapallo to Lausanne, be- 
came further complicated when Turkey by force of arms established her 
right to be recognized and dealt with politely. Upon this happening, 
Turkey herself protested against the tapping from her ancient territories 
of the Mosul petroleum, and this obstinate wish was one of the reasons why 
the Lausanne conference broke up, although even the American repre- 
sentative advised her to yield. Now Turkey has cleverly drawn a new 
element into the situation by ratifying the Chester concession, which gives 
an American syndicate the right to develop petroleum in this region and 
cancels an earlier permission secured by France. The move was clearly 
political on Turkey’s part, for the Chester concession is an ancient one, 
dating back to Abdul Hamid.+ 

It is interesting to note that no foreign oil interest has been posi- 
tively mentioned as being behind the French and British protests. Never- 
theless, it may well be that it is but another phase of the old struggle be- 
tween the Dutch-Shell and the Standard interests. In this respect it is 
interesting also to note, in so far as the British protest is concerned, a state- 
ment by Admiral Chester: “Counting the world war, Great Britain has 
sacrificed 100,000 men in her determination to monopolize Turkish oil. We 
are in Turkey to stay. Great Britain and France would not let us thru 
the front door so we have effected a rear entrance. The door will stay open 
for all time. The world may as well become reconciled to giving up part 
of its oil. In our country we have not enough, yet our automobiles and 
machines are multiplying so fast that we are facing a fatal shortage. Our 
commercial life depends upon an adequate supply of oil. 

“Geography and history will help our people to understand why 
this fight has been made in such intensity. It must be remembered that the 


*Issue of April 16, 1923, in article on ‘‘Mediterranean Issues—Airplanes and 
Mesopotamian Oil’’ by C. W. Barron, President of Dow, Jones & Co., publishers of 
The Wall Street Journal. 

¢Kditorial in Hngineering and Mining Journal, April 28, 1928, J. E. Spurr, Hd. 


ITS TREASURES AND TRAGEDIES 


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10 OILDOM: ITS TREASURES AND TRAGEDIES 


world war was fought over oil. Britain invaded Turkish territory, in the ~ 
oil region (according to official reports) two weeks before war was declared 
between those countries. 


Averting Another International Tragedy. In recommending the crea- 
tion of a council of 25 experts, elected at large and independent of Con- 
gress, to handle our foreign affairs, Mr. Frank A. Vanderlip said, at 
Washington, May 12, 19238: 

“We are admonished not to covet our neighbor’s house. But what 
about his territory, his oil fields, his ports? There wasa coveting of terri- 
tory in Europe which resulted in 25 million refugees driven from their 
homes. * * * There was in Europe a coveting of oil wells which has set the 
whole Mohammedan world afire and brought a fresh threat to civilization.” 

Passing the question of political dominion over the Mosul region, 
France and Great Britain must admit that, if either of them should under- 
take through her nationals to develop that petroleum territory, she would 
eventually call upon the United States to supply some, if not all, of the 
capital, equipment and skilled labor essential to economic success. Know- 
ing that astute Turkey realizes their semi-dependence upon the United 
States in this respect, France and Great Britain may become content to 
leave the responsibility of the petroleum development to Americans and 
amicably to arrange, on equitable basis for the procural of the crude oil 
which they may require. While more embittered politically against Great 
Britain, Turkey, at the same time, has not forgotten the French fiasco of 
the Panama Canal; she must have greeted with glee the announcement 
that General Goethals, the canal builder, would direct the half-billion dol- 
lar enterprise if the Chester concession be brought to fruition.* 

On the subject of international cooperation as opposed to tragic 
competition, A. C. Bedford** has recently expressed himself as follows: 
“No one can regard the petroleum situation in the world today in:a com- 
prehensive manner without being convinced that a clear vision of all the 
elements in that problem leads to but one conclusion, and that is the 
supreme importance of co-operation on the part of the peoples of the world 
both in exploiting and utilizing the oil resources which nature so sump- 
tuously provided.” 

Convenient Location of Latin-American Oil Fields. None of the 
Asiatic fields awaiting development are near enough to the United States 
to prove very attractive to either the American investor or the American 
consumer. Beyond any doubt it will cost us much less to bring our future 
supplies from South America than, for instance, from Mesopotomia, the 
main difficulty being the dubious attitude of the various Latin-American 
states toward foreign enterprises essential in the development of their 
petroleum deposits. As a matter of fact, Columbia, Venezuela, and Trin- 
idad are all about as close to the Atlantic ports of the United States as are 
the Tampico oil fields of Mexico. American interests, present or prospec- 
tive, in Armenia, Mesopotamia and Asia Minor, should therefore not be 
opposed to a mutually profitable apportionment of foreign mineral oil that 


* Early in September, 1923, it was reported that Admiral Chester and his asso- 
ciates had sold out to the Kennedy interests for $300,000 all but 10% of their share of 
the profits of the Ottoman Development Co. But this report has been proven erroneous. 

** Chairman, Board of Directors, Standard Oil Co., of N. J., writing in Foreign 
Affairs, March, 1923. 


OILDOM: ITS TREASURES AND TRAGEDIES 11 


might some day be produced in Asiatic territory now claimed by Turkey”; 
nor should American investors at large become disappointed if they be not 
permitted to share in the Asiatic 
developments except so far as 
they are, or may become, stock- 
holders in the American com- 
panies mentioned below. 


Late in 1922, the Standard 
Oil Co., of N. J., acquired a 25 
per cent equity in the Meso- 
potamian properties of the old 
Turkish Petroleum Co., by 
agreement with the Shell-An- 
glo-Persian companies and the 
French interests, of which the 
latter represent the German 
pre-war share.** It is ques- 
tioned if the Barnsdall con- 
cessions in the Caucasus or the 
Sinclair concessions in Sakhalin 
will ever prove profitable in 
view of the various restrictions 
imposed by the Soviet Govern- 
ment. 


Engineers Become Diplomats 
in International Disputes. Sir 
John Cadman, a leading engi- 
neer in British oildom, lately 
outlined the empire’s policy in 
these wordst: “A weird picture 
has been drawn about Meso- 
potamia. The fact is, that the 
ownership of oil deposits there- 
in will be secured to the Arab 
state as a part of the adminis- 
trative arrangements under the 
treaty mandate. Great Britain 
is denying the chance to all 
nationals, her own included, to 
examine these areas for com-. 


A VENEZUELAN GUSHER 


Sensational developments in petroleum produc- 
tion in Venezuela within the next year are ; , 
expected by experienced oil men. Above mercial purposes until she has 


view is from BE. 8. Durward, of the Caribbean been charged as a mandate. 


Petroleum Co., Maracaibo, and shows a well “One is led to believe that 
they recently got in the La Rosa district, rh HAE Z 
flowing 12,000 barrels a day.—Mining and the British Government is a 


Oil Bulletin, Aug., 1923. great oil company, and that it 


*In March, 1923, the New York Times declared, “The time may yet come when 
oil will have to be distributed according to the need of each country by international 
agreement.” : 

** London dispatch to the New York World, dated Oct. 26, 1922. American par- 
ticipation was said to be due to the demand of the State Department for equal rights 
in Palestine and Mesopotamian oil lands. 

tIn the February (1922) issue of Mining and Metallurgy, quoted by the Mining 
Congress Journal of April, 1922. 


12 OILDOM: ITS TREASURES AND TRAGEDIES 


has subsidiaries such as the Royal Dutch Shellf and the Anglo-Persian 
companies. Rumor asks you whether you can afford to become dependent 
for even a part of your crude petroleum upon such a British combination. 
You are asked to believe that soon your own internal source of supply 
will be exhausted. Emphatically, the British Government is not in the 
oil business. She does not control the Royal Dutch shell—she does not 
have a single share in that corporationt—-and with the exception of shar- 
ing in the Anglo-Persian Oil Company, over which it has no control, the 
British Government is not interested in oil companies.”’ 

In framing a foreign petroleum policy for our own Government 
American engineers and engineer-geologists have been called upon by 
Congress and the State Department to gather fundamental data. Promi- 
nent have been Secretary Hoover of the Department of Commerce; his 
petroleum aid, Mr. H. C. Morris, Dr. David White of the Geological Sur- 
vey, and Dr. C. K. Leith* as chairman of a committee of the Mining and 
Metallurgical Society. 

The question is held to involve more than petroleum. While nature 
distributed petroleum unequally throughout the world§ it pursued the same 
course with other minerals. In some of these, such as copper and iron, the 
world must depend heavily upon the United States. All agree that 
restrictions on the international movement of essential minerals should be 
subject to the minimum amount of control. Nevertheless, there is certain 
to be more or less trading on the strength of mineral advantages as a 
result of the acuteness of the oil situation. It is the hope of the Leith 
committee to be able to furnish information which will make possible a 
more intelligent consideration of this general subject, when placed at the 
disposal of the Government. || 

The United States should distinguish between immediate economic 
needs and remote and perhaps unnecessary diplomatic ambitions. It is 
most legitimate and desirable that for a time we should supplement our 
American oil with whatever we can get from abroad at a cost which will 
represent a national saving. Our ultimate native fuel resources are so 
vast and their extent so continuously enlarged by scientific research that 
there would seem little reason why we should ever feel obliged to incur 
any risks of war in distant parts of the earth on behalf of an imported 
supply of liquid fuel for our country.** 


Restrictions on American Development of Foreign Fields. Secretary 
Hoover of the Department of Commerce said in his annual report, 1922: 
Early in the administration consideration was given by this Department 
jointly with the Department of Interior to the serious situation confront- 
ing our country in its supply of oil. As a result of a survey of our own 


7This foreign concern, largely through the Long Beach discovery made by its 
California subsidiary, controlled over 4% of the oil output of the United States 
in 1922. 

¢ Sixty % Royal Dutch or foreign controlled; only 40% Shell or British. See 
Federal Trade Commission’s report on Foreign ownership in the (United States) 
Petroleum Industry, made to the Senate, February 12, 1923. 

*Adviser to the United States Shipping Board, 1917-18; author of ‘“‘The Strategy 
of Minerals’’. 

§See table and map of petroleum reserves. 

||Paul Wooton, correspondent of Engineering and Mining Journal Press. 

**Joseph EH. Pogue, quoted in The Oil and Gas Journal, May 3, 1923. 


* 


OILDOM: ITS TREASURES AND TRAGEDIES 13 


and the world situation, it was concluded that our domestic sources of oil 
would at the present rate of exhaustion last only a generation, and that 
foreign nations were rapidly pre-empting the available foreign oil-bearing 
territory. Therefore, unless our nationals could reinforce our holdings 
abroad, we should be dependent upon other nationals for the supply of this 
vital commodity in a measurable number of years. As a result of these 
conclusions, conferences were called with the representatives of the oil 
industry, and voluntary steps were taken by them to extend their holdings 


AMERICAN ENTERPRISE ABROAD 


Despite the notorious neglect of our nationals in foreign fields, at least one 
country—Mexico—owes its modern development of mineral resources to men, 
money and material from the United States. Here is shown a steel derrick 
and a diamond core drill made by an American company and used in extend- 
ing the producing area of an oil field near Tampico. 

—Courtesy of Sullivan Mchy. Co. 


abroad. Departmental reports show a rapid expansion of the foreign 
interests of our different companies, and they have now reached an extent 
which should measurably assure to us future supplies under American con- 
trol. It has developed from these investigations that while our oil-bear- 
ing lands are free to the exploitation by foreign corporations, some of the 
principal countries whose nationals are thus engaged here at the same 
time prohibit our nationals from similar free access to their territories. 


Retaliatory action was taken by Secretary Fall just before vacating his 
office as Secretary of the Interior early in 1923. In the opinion of the 
New York World:* Nobody is going to solve the international oil prob- 
lem by making reprisals in Oklahoma against the British and Dutch com- 
panies. To shut out capital from the small fraction of the American sup- 


*Quoted by The Literary Digest of March 31, 1923, page 13. 


14 OILDOM: ITS TREASURES AND TRAGEDIES 


ply that remains untaken will not open the door in the Near East or in the 
East Indies. The American interest in the oil policy of Europe and Asia 
is twofold, first to see available at home a cheap and abundant oil supply 
and next to insure the sharing of American oil companies in the develop- 
“ment of the Eurasian fields. In these oil-fields we have no strategic inter- 
est. The oil problem (with us) is a peace problem. It is a question of 
feeding autos, tractors, gas-engines, locomotives and merchant ships in 
time of peace rather than of warships in time of war.f 


TABLE OF THE WORLD’S PETROLEUM PRODUCTION 
in 1912 and in 1922 


Showing the Quantity and Percentage Contributed by Countries and 
Grand Divisions. 


Thousands of Barrels World’s Per cent 
Countries 1912 1922 1912 1922 
Unitedwe States==== eee 223,000 551,200 63.4 — 64.8 
Meéxi¢o (02225 2s eee eee 16,600 185,050 4.7 21.7 
Canada. 22 S24 Se eee ee ee 240 180 soe Spies, 
Per 3222 eee ee ee ae 150. 5,330 0.5 0.6 
Argentingieee* e SA ee 50 2,670 0 0.3 
TTI RIA dha 2 ee ee ene es 440 2,450 vas! 0.3 
Venezielaac see ae 0 2,340 AO) 0.3 > 
Colomblas22 222-222-220 — 0 320 AO) ae 
Hey pti te oe os See eer ens 200 1,190 0 OA: 
Algeria RD Ne St Se a gD 0 10 ae poh 
UMA aes ee ee eee 13,000 9,820 3.0 12 
‘Poland eee ee eer eee 8,500 5,100 2.4 0.6 
UPA COs ett EO eae ean aie 0 500 0.0 0.0 
Germany ee 2 Sees eee 200 1,030 0 mal 
RUSS Ree Seg, See 68,000 35,100 19.3 4.1 
IPOS a, oe ee Sees ae aes 600* 21,200 sik 2.0 
Dutch ehast indies === 10,850 16,000 oul 1.9 
ATT Gl ie gee en pas ya ama 7,120 7,980 2.0 0.9 
British bores. = ss meas 6£ 2,920 nae ‘3 
Japan wand Hormosas === 1,670 2,000 9) 3 


Summary by Grand Divisions. 


NOTE AM Cri Ca ee ee 239,840 736,430 68.2 86.5 
South “America 22 a2 aes 2,240 13,110 6 15 
TNocaleeA MET Caeser ee 242,080 749,540 68.8 88.0 
BESS ire ese eke ey ee ee 20,246 50,100 Sali 5.9 
PATRI C ates tet See ee he ae ae se 1,200 0.0 ll 
EERULTSO J) Care es sence eae gee 89,700 51,550 25.5 6.0 
AUWISGRATT A Ste ne ose ee O$ O§ 0.0 0.0 

352,226 852,390 100.0 100.0 
1OMY CATA Cai sence 500,164 = 142 per cent. Revised statistics of the U. S. Geol. 


Survey gives the yield of the United States in 1922 as 557,531,000 bbls.; but the 
share in the world’s yield remains practically 65 per cent. 


yIn reversing his predecessor’s decision, Secretary Work announced May 16, 1923, 
that corporations controlled by foreign interests are again permitted to obtain oil 
and gas leases on restricted Indian lands. 

*Campbell M. Hunter, of London, quoted in (United States) Mining and Metal- 
. lurgy of February, 1920. 

tSarawak, from the An. Rep. of the Royal Dutch-Shell Co., quoted by A. H. Red- 
field in Economic Geology, August, 1922. 

§As in Seotland the only mineral oil obtained in Australia is shale oil. 


OILDOM: ITS TREASURES AND TRAGEDIES 15 


Present Dominance of the United States in the Oil Industry. Allow- 
ing for 4% foreign ownership at home, and for 80% control of Mexico’s 
oil industry, the United States, through its nationals, last year controlled 
about 78% of the world’s output of petroleum. Including the 23 million 
barrels produced by foreign corporations, the 551.2 million barrels of 
domestic oil obtained in our country in 1922 constituted a direct con- 
tribution of 65% to the world’s output. Our gain of 79 million barrels, 
or 16.7 per cent over 1921 made up more than nine-tenths of the 86.5 
million barrels increase for the whole world. Not in copper, cotton, or 
corn is our present world supremacy so marked as in petroleum although 
we export relatively much more of our domestic production of the first 
two. 

Our per capita yield of petroleum has been steadily increasing. It 
rose from 4 1/3 barrels in 1921 to 5.0 in 1922, promising to become nearly 
7 barrels in 1923. No nation except Mexico surpasses us in this respect. 
Mexico’s maximum per capita yield of 13 barrels was attained in 1921, 
but dropped to 12 barrels in 1922. However, along this line of com- 
parison Mexico, in turn, is excelled by six of our individual states, namely 
Oklahoma, California, Wyoming, Texas, Kansas and Arkansas. 

In consumption, our leadership is more pronounced and is not, on 
a per capita basis, approached even by Mexico which usually retains and 
uses less than 5% of her production. With only 7.5% of the earth’s land 
area and with only 6% of its population we are consuming 70% of its crude 
mineral oil. and fully 80% of one refined product, namely gasoline. 

The Bureau of Mines* has published statistics of the quantity of 
petroleum used in 1921 by certain countries. The units have been con- 
verted from gallons to barrels of 42 gallons each and are given herewith 
in millions: 


mined Sates: see ee} BS eee e2D: Cita See Sen Oe en eee Arete Se 4.8 
inte dies in od oni =.= Sea. epee tes Abeworzwe, are “lionm cavers pep A he Bh 
CRNDEKO I 9 a, Ss SiR Sle ee ee ee 9.5 C1] Ge re ea ees ayes ea Be Ps 3.0 
[SNR MAVCYS). ox, Davies Aled 5 JIM Oe ee ae 8.9 IVEGSC Opec = Sea On een tere) Petey ie ied ayy 
Ditch Hast Indies: -2ses 225 5.4 SMG Hi ofa ea SD Sere ia aS Ti RS Sem 2 


These figures for 1921 become significant if expressed in consumption 
per person, as shown below: 


(GIN GS CER SCS Cl le. a 4.8 Chinato oe ste Pe Ot ee oe 0.011 


Remit Cie IM OMe fg 8 ne ko 0.7 JVADOMSAnO RP OTmOsies i =a. ere a 0.053 
Mee eet pee eee pee ea: Ub PRA eae Rt ee. eee See ee Cee 0.80 
Eg a ey SE RIS el 0.2 MECKICO ere ee ee 0.10 
Pt ememaste ln glee: ss 0.11 ANISErS amie oe ee ee 0.22 


From the above it appears that we consume 4.4 times as much per 
capita as Canada. The latter relatively uses 10 times as much as the 
Dutch East Indies and they in turn, use 10 times as much as China de- 
spite its huge consumption of kerosene. Thus our consumption of petrol- 
eum per man, woman and child appears to be, roughly, 400 times that of 
China. It may be truly said that the per capita consumption of mineral 
oil is fast becoming an index’ to the ae SOE if not the extrava- 
gance, of civilized nations. 


— 


-*Hstimates by W. C. Hill, published in the Qi] and Gas Journal, November 4, 1922. 


£2 -! OILDOM: ITS TREASURES AND TRAGEDIES 


Efforts of Some Countries to Find or Open Domestic Deposits. Four 
instances are cited of activities in coal producing countries seeking do- 
mestic supplies of mineral oil. 

England, during the past eight years, has expended over $2,000,000 
in drilling almost 31,000 feet of test wells within her boundaries without 
discovering oil of any commercial consequence. The value of the 
petroleum produced has been estimated at less than $100,000.* 


In South Africa the Northwestern Cape Colony Prospecting syndicate 
has for 20 years been boring for oil near Carnarvon. Efforts in that 
immediate locality were lately abandoned after an English expert reported 
adversely. The Government of Australia has a standing offer of nearly 
one-quarter million dollars reward for the discovery of mineral oil in 
paying quantities within that commonwealth. So far only two likely 
structures have been found and a trial bore is being sunk on one of them.{ 
After spending about $150,000 the Government has given up its own test 
at Roma, owing to an excessive inflow of water.§ 


However, British oil companies, operating outside of the Empire, have 
met with more success, particularly in Mexico, Persia, the United States, 
and Rumania. The total amount has been estimated at 52.6 million bar- 
rels by a London authority but the published list appears to be incomplete. 
After allowing 40% of the Royal Dutch-Shell Company’s output in the 
United States (23 million barrels in 1922) and say 60% of the entire 
Persian output (21.2 million barrels in 1922), the British oil companies 
controlled, in 1922, at least 75 million barrels of petroleum or approxi- 
mately 9% of the world’s production.|| 


Aeronautical France, which has been getting most of her gasoline, 
illuminating and lubricating oil from America and paying a seemingly 
high price for the first named, has bestirred herself since recovering from 
Germany the Pechelbronn oil ‘“‘mines’” in Alsace. Even with new shafts 
over 1000 feet deep compared with the earlier diggings of 40 to 300 feet, 
the annual output is not expected to exceed half million barrels, or no - 
more than the daily rate of Oklahoma alone at the middle of 1923. To 
supplement this seemingly small amount of domestic production the Freneh 
people are now normally importing in a year nearly 9 million barrels of 
petroleum products. Various steps have therefore been taken to reduce 
the requirements from foreign sources. These include encouragement to 
further prospecting in France, Algeria and Madagascar and the legal 
obligation of importers, beginning August 28, 1923, to buy of the Govern- 
ment 1-10 as much motor alcohol as the volume of gasoline imported. In 
October, a liquid fuel congress and exposition were held in Paris. Both 


*Wall Street Journal, December 4, 1922. According to Trade Information Bulletin. 
No. 80 of the Bur. of For. & Dom. Com. January 29, 1923, the English discovery was 
made at Hardstoft in Derbyshire. Similar high grade oil was found 300 miles away 
and 1,800 feet deep near Edinburgh, Scotland, in May, 1921. See also chapter on 
Commercial Geography. 

+United States Commerce Reports February 5, 1923. 

¢The Oil and Gas Journal, January 25, 1923, Page 136. 

§The Mining Journal, London, December 30, 1922. 

|In September, 1923, the Royal Dutch-Shell Co., was getting %4-million barrels 
of oil daily; 80,000 in California, 40,000 in Mid-Continent, 100,000 in Mexico and 
30,000 in other fields—R.Airey of the Asiatic Petroleum Co., quoted in The Oil and 
Gas Journal, September 6, 1923. 


OILDOM: ITS TREASURES AND TRAGEDIES li] 


proved disappointing as to the expected attendance of foreign producers, 
refiners and marketers who might have valuable trade or technologic sec- 


rets to reveal. 


Why Nations Seek Own Sources of Oil Supply. In general, the more 
civilized foreign nations are ambitious to have their citizens own or con- 
trol petroleum deposits—colonial, domestig or foreign—sufficient for two 
purposes: (1) Industrial independence from the United States with 
special reference to the refining of the crude oil; and (2) military de- 
mands which, for countries like Germany with negligible domestic deposits, 
involve reserve storage of large quantities of lubricants and gasoline. 
Some authorities say that the Central Powers were defeated as much 
through their shortage in these supplies as through any privations and 
propaganda that influenced their folks at home. 


Special reasons impel some nations, notably Great Britain, Nether- 
lands and Norway, to encourage their nationals in the quest of petroleum 
deposits. The countries 
mentioned are to a great 
degree dependent upon 
shipping as a source of 
national income, and it is 
but a question of time be- 
fore fuel oil will entirely 
displace coal for marine 
motive power, particularly 
if the Diesel engine should 
be universally adopted. As 
a matter of fact, the mer- 
chant marine of the world 
consisted of oil-burning 
vessels to the extent of 26 
per cent in 1922 compared 
with only 3 per cent eight 
years earlier. 

Lord Curzon* has 
stated that whereas Great 
Britain imported nearly 
3°4 million tons, or over 


CAPT. ROALD AMUNDSEN’S SCHOONER “MAUD” 28 million barrels,} of oil 


at Seattle, taking on petroleum supplies for its ; ie O- 
Arctic cruise, June 4, 1922. Note the Norwegian Se 1920, her domestic tes 
flag and crowd on dock and roof. Gasoline will duction (presumably from 
again be needed for the next attempt of the South g h. shal 

Pole’s discoverer to find the North Pole. cotch shales) was only 


—Courtesy Union Oil Co. of Calif. 166,000 tons, or a little 

more than 1 million bar- 

rels. Of the oil imported, 61% then came from the United States, 37% 

from other countries, and only 2% from the British possessions. Yet 90% 

of the British navy is now oil-fired, and the use of oil is increasing in the 
mercantile marine, so that the urgency of a supply of oil is manifest. 


bine iS Be ts 


*Quoted in an editorial of the Mining and Scientific Press, July 16, 1922. 
tIncreased 67% to 34.3 million barrels in 1922. 


ITS TREASURES AND TRAGEDIES 


OILDOM 


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OILDOM: ITS TREASURES AND TRAGEDIES 19 


WORLD’S KNOWN RESERVES, PRESENT PRODUCTION RATE AND 
REMAINING YEARS OF LIFE, JAN. 1, 1924. 


Life Left 
Remaining* Yield At 1923 
Country and Reserves 1923. Rate 
Grand Division Millions of Barrels 
RRS LC eS ote ee kL eae 12,000 735 16 
Pere t MexiCg. uo tS 4,000 142 28 
Rea TUOMAS <0 ot et et ee fr 7 -2,.000 ye a 
Northwestern a Sa oc ile maa aman mia 6 
Sotth Wiest Zl CLS um ee ee a ee Ce 
oe PPT ates ter ee She A 9,000 3 500 
ee (OAS TA), ae A ee DORE 2 : 
ap hapnios Pemarron ing tee er 6,000 5 850 
South Bolivi t 2 
rr erinn RIM eeEO LT ee eee a 
Pemanig- © Polatdertee 2a io fe ee 2,000 17 120 
Snr pen eerie eee ko A ce 7,000 35 200 
AE Wate EEE SEE ee ne 4,000 0 -- 
Rerdin-std Mesopotamia... 7,500 25 300 
SO OMIEMIII MR OrniNaH ou 2 8 2 ee 2,200 2.2 -- 
nee Ce ree We re or ee 1,500 ma -- 
Rt ee Ee oe Pe ger eS 2,800 8.2 350 
WERE eee ee ee ee a 3,000 20 150 
mer nementertin sw ctes id we en 1,000 1.2 800 
SUMMARY 
INGrIN AA INeE i eS ee ey a Pee ane LS O00 878 20.5 
South America________ 4D: 28 eRe Sie” eae 15,000 25 600 
BOURODG cea ot 3 Pees ey bee oe ee OD OOO 52 160 
AOS lee a Sedaiee eee e  S o Sea a ene oe 21,000 55.5 380 
MimtierumArricn ste ao ee 1,000 1.2 800 
Total quantities, average life________________ 64,000 1,011.7 63 


Position and Importance of Petroleum in the United States. Nowhere 
in the world does petroleum and its dependent industries present so many 
important phases and effect, as in this country. In only one other nation 
is it more significant in any respect, namely in Mexico where of late it 
has, through taxation, furnished nearly all the funds needed to support 
the Federal government. While making but one per cent of the entire 
revenue received by Uncle Sam in the form of income tax for 1919, the 
total of 38.6 million dollars derived from the oil and gas industry proved no 
mean amount that year. It then made up 51 per cent of the income tax 
levied on the American mining industry, compared with 23.6 per cent to 
the credit of coal mining. 

The most vital relation of petroleum is not, after all, toward trans- 
portation—aerial, terrestial and submarine—but towards the basic food- 
producing branch of industry, ancient and honorable agriculture and stock- 


*These estimates represent the author’s modifications for January 1, 1923, of the 
White-Stebinger approximations appearing in Oildom, October, 1922. David White, in 
The Mid-Pacific Magazine, June, 1923, wrote that wild estimates are better than none 
and that the obligation of the geologist is to make them as good as possible; but that 
they will be often revised during the next half-century with advances in geologic 
explorations, drilling tests, commercial production, and technical discovery. S. K. 
Hornbeck, of the U. S. Department of State, in addressing the “Raw Material’ con- 
ference at Williamstown, Mass., August 11, 1923, mentioned 70,000 million barrels 
as the latest measure of the world’s petroleum resources. 


20 OILDOM: ITS TREASURES AND TRAGEDIES 


raising. ‘The general employment of the tractor and oil-driven equip- 
ment in this field suggests great possibilities to follow in saving labor on 
the farm and increasing production not only of food but also of fiber. 
Julius H. Barnes, president of the Chamber of Commerce of the United 
States and an international authority on grain, recently said that while 
the agricultural industry was not generally considered to be highly 
mechanized, the wheat crop of today, if the same crop were produced by 
the methods in vogue before the invention of the reaper and other mechan- 
ical devices, would require 130,000,000 working days’ labor. The American 
worker produces yearly an average of 12 tons of cereal per worker, com- 
pared with an average of only 1% tons per farm worker of the world at 
large. The tractor and oil-driven equipment will more than make up for 
the 1,700,000 fewer workers on the farm in 1920, compared with 1910. 
They will help solve the problem of labor and production costs which now 
engross the minds of our farmers.’’* 

In some states as in Oklahoma, the economic sitiaGon of the oil 
industry must be considered in weighing the condition of the farmers. 
Many hundreds are getting an annual revenue from leases of land not yet 
developed and large numbers are drawing royalties. But oil is not yield- 
ing direct revenue for the great majority of farmers. 


i = Onb an Gas Journal. 
GRAIN FIELDS AND ORANGE GROVES GIVE WAY TO GOLDEN OIL. 
Discovery well at Compton, latest new field in Southern California, 1923 


One does not think of New York as an oil town, yet nearly a quarter 
of its total trade as a port is in petroleum and petroleum products. Most 
astonishing is the fact that in 1922, in point of tonnage, mineral oil made 
first place in the total traffic of each of the six leading sea-ports of the 
United States, namely New York (19,000,000 tons total traffic), New 
Orleans (6,700,000), Baltimore (5,200,000), Philadelphia (5,150,000), 
Port Arthur, Texas (4,800,000), and Galveston.+ During the fiscal year 
of 1921, petroleum and its products were exported to a value exceeding 
500 million dollars. In 1922, with a value of almost 350 million dollars 
and a rank next to cotton and wheat including their manufactures, mineral 
oil made up nearly 10 per cent of the total value of all domestic mer- 
chandise exported. Oil traffic through the Panama canal was paying 50 
per cent of the Government tolls during 1923, and at one time during the 
latter part of this year it was moving east at a rate of almost 150 million 


*Hditorial from The Oil and Gas Journal, May 17, 1928. 
{The Literary Digest, June 17, 19238, page 70. 


21 
1923, 


the 2% 
S15; 


ic and Gulf 


troleum alone for this 
ing 


to Sept 


it from the port 


’s greatest export 
This tremendous 


has resulted in a 


000 dur 


1 


In Atlant 
ico. 


Q 


1c 
’ 


200 
h ran from July 


da year ago. 


most of 


’ 


in Mex 


ia pe 
ific to the Atlant 


forn 
ion barrels, 
ico 


of Los Angeles, which in 1923 has become the world 


1 


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ill 
ic 


° 


tons per annum. 
being nearly $5 


ing 


. 


ts, 


TREASURES AND TRAGEDIES 


ipts of Cal 


1p 
10 


ITS 


OILDOM 
barrels or more than 20 million 
year will probably total 70 to 75 m 
center for crude oil, even surpass 
traffic in petroleum from the Pac 
doubling in the toll rece 
months of the fiscal year 1924 wh 


Coast ports the actual rece 
compared with the same per 


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CHAPTER II. THE NATURAL RESOURCE. 


Nature and Origin of Oil. Crude petroleum is a liquid bitumen— 
a complex mixture of many compounds, principally those of carbon and 
hydrogen. It is extremely variable in weight, color, and thickness or Vis- 
cosity. In general it ranges in specific gravity from 0.75 to 0.99*—that is, 
it is lighter than water. Some of it has a light color and may be very 
mobile; some, an almost black color and may be very viscid. Petroleums 
are commonly divided into two groups, one of oils having a paraffin base. 
and the other of those having an asphaltic base. Usually the oils that have 
a paraffin base are lighter and contain more gasoline and more lubricating 
oil and are therefore worth more than the others. 

Natural hydrocarbons are present in all sedimentary rocks of marine 
origin that are not too much altered or metamorphosed. While they are 
also stored in sediments of fresh-water origin, no valuable deposits in such 
have so far been found. The 
ereatest amount occurs in dissemi- 
nated condition in the shales, es- 
pecially in the fossiliferous black 
shales where oil forms as much as 
21 per cent of the rock mass. As 
little as three per cent can be ex- 
tracted by heating the shales and 
driving off the crude oil. Impure 
limestones, notably dark ones, are 
full of oil, evidenced by the odor 
on breaking the rock. Even if a 
series of 1,500 feet thick had but 
1 part petroleum in 100,000 parts 
emCTION Oman eee ' (of bed rock), this amount would 

By way of cracks or joints the oil mi- yield 750,000 barrels to the square 
grates from the mother shale up into mile, about equal to the greatest 
porous ‘‘sands.”’ e : 

actual production per square mile 
of any part of the leading Appalachian fields. But if the material is to be 
commercially valuable, it must be concentrated by natural agencies into 
limited underground areas. Furthermore, to be of use to man, these in- 
visible reservoirs must be discovered by drilling. The natural hydrocarbons 
occur in the sedimentaries in all conditions from natural gas through 
light oil and heavy oil into asphalt. ‘ 

Three theories ascribe an inorganic origin to oil, namely the car- 
bide, the volcanic, and the sedimentary theories. Of six organic theories 
two claim animal origin. The explanation usually accepted is that oil is 
formed from the same material as coal, that is, mainly from vegetal 
matter. Plants, except for the water in them, consist principally of the 
same elements that go to make up petroleum and natural gas.+ 


DEL AE Ser sees : 


*On the Baume light scale the range is from 56 degrees for the lightest to 11 
degrees for the heaviest crude, 10 degrees B. corresponding to the specific gravity 
1.00, of water. 

{‘‘World Atlas of Commercial Geology,” U. S. Geological Survey, 1921. 


w (ez) 


OILDOM: ITS TREASURES AND TRAGEDIES 23 


ra 


The material from which petroleum originated was first laid down 
on the floor of the sea; the greater part of it was seaweed, with some 
animal tissues which become deposited in connection with fragments of 
coral and broken sea shells forming beds of limestone. In some rocks 
of this kind the odor may still be noted in freshly-broken pieces; so marked 
is the smell that they are known as stink stone. Masses of clay washed 
down opposite river mouths are heavily charged with fibers and tissues 
which high pressure reduces into oil and gas. Such carries vast amounts 
of plant remains. When this is deeply buried under the pressure of other 
deposits Nature distils it slowly into oil which, separating by gravity from 
the gas and the salt water, accumulates with these in porous beds; with the 


WATER IS ESSENTIAL 
TO FLOAT THE OIL TO 
THE HIGH PART OF 
CERTAIN STRUC- 
TURKS. 


Here is shown a heavy 
flow of salt water near a 
large untested Texas struc- 
ture once leased by the 
author. This well was 
drilled 7 or 8 miles from 
the apparent center or 
geologic high point and 
thus missed the oil itself. 


gas above and the water below. Overlying impervious strata prevent the 
upward escape of the oil; and the subsequent movements of the earth’s 
crust, such as bending or breaking, create structures for the natural trap- 
ping or storage of the oil until the impervious beds have been punctured 
by the drill. If the pressure of either the water or the gas is great enough 
gushers or flowing wells will result when the petroliferous stratum has been 
penetrated.* 


Briefly, the purely animal theory is now definitely on its defensive, 
the rival vegetal theory having decidedly gained ground especially among 
the younger generation of practical geologists and those who are intimately 
associated with the winning of the precious fluid.+ 


Occurrence in Geological Structures. The world’s petroleum comes 
from sedimentary beds, almost entirely from sands, sandstones, conglom- 
erates, and porous limestones. The deposits are universally held in by 
coverings of shale, clay, or marl. The bodies of strata most common in oil 
fields are those in which thick shales, clays, or marls alternate with rel- 
atively thin sands.# 


* “Surface Marks of Oil Deposits,’’ P. H. Pearson. 
+ “Oil-Finding,” E. H. Cunningham-Craig, 1920. 
+ “Geology of Petroleum,’’?’ W. H. Emmons, McGraw-Hill Book Co. 


24 OILDOM: ITS TREASURES AND TRAGEDIES 


Any arrangement of the beds to form a trap for the gathering of oil 
in commercial quantity, is called a “structure.’”’ Some structures completely 
trap or enclose the oil within a part of the porous bed, i. e., they are more 
or less closed. They include domes, anticlines (or elongated domes), and 
lenticular sands. The domes may be formed by the ordinary “‘blistering” of 
the earth’s crust, by the underground growth of thick salt lenses, or by 
the upthrust about a volcanic plug. Local structural highs and sealed 


s > > VF > > 3 VS 3 x 
a3 Ee ere eer coi ini. 2 
A cS S SS 8 8 8 ss OS § 
-—— i; 2 A Surface Ri iM A RA 
lee A = bi Nh lS 
2 ee = ee 
oe ee eee Oe ee ee 
Ee ESS = = S!S=—, ——— on 
——— is os ee Sands containing 
= Fresh water cee ————. Bae fresh water 
‘ee SS Bee az 
SS Enns Ga eee = _———S——————— 
a Pa 


= 
——— 


—S<— Shale 
= .—Limestone 
= -—_ 5) 


= 


———— SS == 
SS S— Salt water e 


GENERALIZED, CROSS SECTION THROUGH AN OIL AND GAS FIELD 
—Bureau of Mines, Natural Gas Manual. 
faults may hold the oil along the anticlines. Of less importance are the 
retardation structures on monoclines of moderate dip, i. e., strata gently in- 
clined in one direction only. The retardation may be due to local horizon- 
tality or terracing, to mere change in the rate of dip, or to the development 
of anticlinal noses. 

Experience has shown that each oil field has a characteristic and dis- 
tinctive geological structure. The following classification of American 
fields is based on structure: 

1. Fields with folded structure (anticlines and synclines)—the Ap- 
palachian f., Illinois, the Mid-Continent f. (Oklahoma—Kansas N. Texas), 
N. Louisiana, California, Wyoming, Colorado. 

II. Fields with monoclinal dip (homoclines)—Ohio-Indiana; of minor 
importance in California and Wyoming. : 

Ilf. Fields on domes—Wyoming, Ohio, Louisiana-Texas Gulf Coast, 
Mexico. ; 

IV. Fields on faults—California and Wyoming (of minor import- 
ance). 

V. Fields on unconformities—California, Oklahoma, New York, On- 
tario, Quebec; of minor importance in Wyoming. * 

Petroleum occurs in synclines or ‘‘down-folds” only in the absence 
of (salt) water from the containing stratum. 


* Ziegler’s “Popular Oil Geology,’ 1920. At Mexia, Powell and Luling, Texas, 
faulting is admittedly the major factor in trapping the oil. The great pools of Mexico 
are located in areas with fault systems. 


OILDOM: ITS TREASURES AND TRAGEDIES 25 


TWO EXTREMES IN 
SURFACE SIGNS. 

1. Natural gas discov- 
ered: in a_ shallow well 
drilled for water—near and 
north of the Virgelle struc- 
ture, 15 miles SW of Big 
Sandy, Mont. 

—Photo by the author. 


2. Asphaltic residue or 
“Drea” that remains after 
the oil exudes from the 
sandstone and partly evap- 
orates. Under the Cali- 
fornia sun the “‘brea’”’ flows 
in ropy forms and cascades 


over the edge of a Tertiary 
bed. 
—Photo by R. HE. Vandruff. 


—U. S. Geol. Survey. 
OIL SEEPAGE NEAR HEAD OF KATALLA SLOUGH, ALASKA. 
Note the gas bubbles breaking in the surface of the residual gil. 


26 OILDOM: ITS TREASURES AND TRAGEDIES 


The Carbon Ratios of Coals in Relation to Oil Fields. As regards the 
alteration or metamorphisis of rock originally oil-bearing a discovery of 
great practical value was made less than a decade ago by David White, 
of the Geological Survey. Petroleum in reservoirs associated with the 
coals show differences corresponding to the degree of alterations of the 
coals. In the few regions where the geographic association of oil with 
coal exists closely, almost always with the oil beds (stratigraphically) 
lower, it has been found that the percentage of fixed carbon in the coal 
amounting to 65 or more precludes the possibility of commercial deposits 
of either oil or gas. Where the coals range from 60 to 65 per cent gas 
may be found but no oil of consequence. Where the fixed carbon ratio 
runs from 55 to 60, both are found in abundance. These rules apparently 
apply to Arkansas, Oklahoma, Pennsylvania, Texas, Wyoming and several 
other states that produce both coal and petroleum.* 


Surface Signs of Oil Deposits. The presence of petroleum in any region 
may be indicated by oil springs or seepages or by surface deposits of 
asphalt or paraffin wax, and its location underground may be inferred 
from visible stratigraphic and structural features favorable to its ac- 
cumulation. 

Seepage is the surest evidence of the presence of oil. Most of the 
Tertiary oil fields of the world are located where seeps occur. Seepage has 
given the discoverer the first and often the only clue to the oil value of the 
field. This and structure combined form conditions that delight the heart 
of the driller, as largely eliminating chances of failure. The fields 
of Mexico are located in extensive areas of exudation. The great Bibi- 
Eibat fields of Russia were first operated amidst such visible signs. De- 
velopment in California mainly followed seepages. In Burma, Galicia, 
and Roumania, surface marks showed the way. In the Mid-Continent field, 
however, oil springs are rather rare. The reason is that the beds are so 
slightly tilted that they remain unbroken and there are no fissures along 
which the oil can reach the surface in noticeable quantity. Though seepage 
and asphalt show that oil has been lost we have reason to believe there is 
more where it came from.t 

Geological Distribution. Nearly all the oil produced in Europe, Asia, 
Africa, and Oceanica is obtained from Tertiary strata. In Canada oil is 
obtained from Silurian and Devonian rocks, and in Mexico, the West 
Indies, and South America from Cretaceous and Tertiary rocks. In the 
United States, which alone supplies two-thirds of the world’s output, and 
in which the scientific quest for it has included the entire stratigraphic 
column, petroleum is found in the beds of every geologic system above 
the Cambrian, though the most productive rocks are in the Devonian, 
Carboniferous, Cretaceous, and Tertiary systems. The Pennsylvanian, 


* “Geology of Petroleum,’ W. H. Emmons. 


+ Pearson’s ‘Surface Marks of Oil Deposits.” Seepages are most in evidence 
and strongest in those regions where the folding is most recent, and where stresses 
are still in operation; regions of early buckling furnish little evidence of seepages 
such as oil or gas springs or asphalt deposits. Such former deposits may have been 
eroded. The readiness with which seepages are healed is apt to be underestimated; 
they tend to stop themselves.—David White, Chief Geologist, U. S. Geological Survey. 


t World Atlas of Commercial Geology, U.S. G. S., 1921. 


OILDOM: ITS TREASURES AND TRAGEDIES 


27 


PRINCIPAL DIVISIONS OF GEOLOGIC TIME, MODIFIED FROM THE 


LSE 


Recent. 


Quaternary] pjeistocene. 


Cenozoic 
(recent 
life). Pliocene. 
Miocene. 
Oligocene. 
Kocene. 


Tertiary. 


r “Age of man.”’ 


S. GEOLOGICAL SURVEY 


eS LS LS 


Characteristic life. 


Animals and plants of 
modern types during Great Ice Age. 


“Age of mammals.’’ Possible first ap- 
pearance of man. Rise and develop- 
ment of highest orders of plants. 


Cretaceous. 


Mesozoic 
(interme- 
diate life). 


Jurassic. 


Triassic. 


Permian. 


Carbonifer-| Pennsylva- 
ous. nian. 


Mississip- 
pian, 


“Age of reptiles.”” Rise and culmina- 
tion of huge land reptiles (dinosaurs), 
of coiled shellfish with complex parti- 
tions (ammonites) and of great fly- 
ing reptiles. Appearance (in Juras- 
sic) of birds and mammals; of cycads, 
an order of palmlike plants (in Trias- 
sic); and of angiosperms such as 
palms and hardwood trees (in creta- 
ceous). 


“Age of amphibians.’’ Dominance of 
club mosses (lycopods) and plants of 
horsetail and fern types. Primitive 
flowering plants and earliest cone- 
bearing trees. Beginnings of back- 
boned land animals. Insects. An- 
imals with nautilus-like coiled shells 
(ammonites) and sharks abundant. 


Devonian. 


Paleozoic 
(old life). 


Silurian. 


Ordovician. 


Shellfish (mollusks) 
Rise of amphibians 


“Age of fishes.’ 
also abundant. 
and land plants. 


Shell-forming sea animals ruling, not- 
ably relatives of the nautilus (ceph- 
alopods). Rise and culmination of the 
animals known as sea lilies (crinoids) 
and of giant scorpion-like crustaceans. 
Rise of fishes and of reef-building 
corals. 


Shell-forming sea animals abound, not- 
ably cephalopods 
Culmination of buglike crustaceans, 
the trilobites. First trace of insects. 


Cambrian. 


Trilobites and brachiopods most charac- 
teristic. Seaweeds (alge) abundant. 
No trace of land animals found. 


and brachiopods. 


Duration 
variously 
estimated. 


toe 
million 
years. 


4 to 10 
million 
years. 


hia to. 20 
million 
years. 


Algonkian. 
Protero- 
zoic, (pri- 
mordial 


life). Archean. rocks 


Virst life that has left distinct record. 
Crustaceans, brachiopods, and _ sea- 
weeds. 


Crystalline | No fossils found. 


28 OILDOM: ITS TREASURES AND TRAGEDIES 


the upper division of the Carboniferous system, has proven to be the most 
prolific series of oil-bearing formations in the Mid-Continent field; while 
the Mississippian, the lower division, prevails east of the Mississippi. 

The following summary of stratigraphic distribution of oil (and gas 
fields) in North America covers the important systems of strata accord- 
ing to past production and is brought up-to-date. Where several systems 
are represented in one state the name of the state is capitalized to show 
the leading occurrences. (Modified from Ziegler’s ‘Popular Oil Geology’’.) 

Tertiary: CALIFORNIA, Gulf Coast of TEXAS, Louisiana, and MEX- 
ICO. 

Cretaceous: California (COLORADO), LOUISIANA (Haynesville, 
Homer, Caddo, Bull Bayou), Mexico, MONTANA, TEXAS (Mexia, Cor- 
sicana-Powell), WYOMING (Salt Creek). 

(Permian): Oklahoma, North Texas (Burkburnett in. part). 

Pennsylvania: Illinois (in all parts), Indiana, KANSAS, Kentucky, 
Ohio, Oklahoma, Pennsylvania, North and Central TEXAS (Burkbur- 
nett, Stephens Co., Ranger, Pioneer, Electra), Wyoming (Lander). 

Mississippian: ILLINOIS, INDIANA, KENTUCKY, OHIO, PENNSYL- 
VANIA, WEST VIRGINIA. 

Devonian: OHIO, (ONTARIO, CAN.), NEW YORK, PENNSYLVANIA, 
WEST VIRGINIA. 

Silurian: New York, (Ontario, Can.). 

Ordovician: OHIO-INDIANA (Lima-Ind. field), Kentucky, New York 
(Ontario). 


Of relative unimportance are the Cambrian below the Ordovician and 
the Quaternary above the Tertiary. The oldest oil-bearing beds occur in 
New Brunswick and New Foundland, and the youngest in California and 
the Gulf Coast field. 

Natural Petroleum Treasures and Tragedies. Mention has already been 
made of the extinct animals whose buried bones were discovered about 
15 years ago in asphalt beds of the Sherman or Salt Lake oil field located 
on the western edge of Los Angeles. One of the illustrations herewith 
shows the Imperial elephant, the giant sloth, and skulls of sabre-tooth. 
tigers. Visitors to the American Museum of Natural History in New York 
City will find there a splendid group of two tigers caught in the natural trap 
of sticky oil and asphalt, to which, like the giant wolf spectator, they were 
attracted by the bulky bait in the form of ground-sloths. The greatest col- 
lection, comprising over 10,000 individual birds and mammals dug out 
from Rancho La Brea, are housed in the Museum of Science, History and 
Art at Los Angeles; and those that are mounted must always prove of 
great interest to all persons connected in any way with the petroleum 
industry. A similar find has been recently made in the San Joaquin 
Valley, also near oil wells, but its extent has not yet been determined.* 


* Tragedies in Nature traceable to petroleum are not confined to the land by any 
means. According to the Oil Paint and Drug Reporter of October, 1922, nations are 
being called together to prevent the pollution of waters of the earth through the dis- 
charge of waste petroleum thereupon. Righteous indignation has been voiced in the 
sportsmen’s circles of Great Britain particularly at the alleged destruction of famed 
fishing streams by the drainage thereinto of oil from highways. The tragedy that 
befalls the larvae of the mischievous mosquito when kerosene or the cheaper crude 
oil is used to form a film on the water surface becomes a treasured protection to the 
health and comfort of mankind in many malarial regions. 


29 


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ITS TREASURES AND TRAGEDIES 


OILDOM 


30 OILDOM: ITS TREASURES AND TRAGEDIES 


In connection with geological investigations made at great depths or 
before the development of an oil field, district, or pool, not only is science 
enriched but unexpected and valuable discoveries of coal, potash, sulphur, 
and other economic minerals are made. 
As an example of scientific treasure, 
there is given below the geological 
record or summarized log of the 
world’s deepest wells. This test was 
sunk by the Hope Natural Gas Co. on 
the Goff farm near Bridgeport, Har- 
rison Co., West Virginia, in an effort 
to reach the “Clinton” oil and gas 
zone of Ohio. It was begun April 19, 
1916, and finished March 4, 1918, to 
7,386 feet without reaching the de- 
sired depth because the cable parted 
2,000 feet above the bottom. In the 
table, the depth to the base of each 
series or system starts from the bot- 
tom of the Pittsburgh coal seam 
(lower end of the Monongahela 


ONCE THE : 
WORLD’S DEEPEST OIL TEST. series), an assumed level of 200 feet 
Near Bridgeport, W. Va. above the derrick floor. 

Name of Bed or Formation Thickness Feet Series Depth 
Conemaweh= San dao Gee sion ele sis aeeGrane o cuswepevelsiets ornate 600- 
Allegheny Coal-Bearing Formation ............ 290 +} Pennsylvanian 1150 
Pottsville Coal-bearing formation .............. 260 
Mawel: Chum kes oo ee hie ierale cgarstoto are niente areas 260 
Mountain (Greenbriar) limestone .............. 65 +} Mississipian 1740 


“Big Injun’” Squaw, and Berea sand group....265 
Catskill (Venango) sand gr. to base of Bayard. .770 
Chemung Shales (Hlizabeth, Speechly, Bradford 


& Kane esand = norizons) yw cccne ceva eis oer ances 2,190 | Upper Devonian Shales 7563 
POTtA ee Beds saicawied so aacteole o Carcass Wiemelece eos eae ele 1,207 
Genesee: Statens asin viaienie Gatasseietetors sanreoseciaue ere eee 288 
Hamilton sand | Marcellusiy copcoccsmt nce ere ies 1,368 
Corniferous limestone to bottom .............. Don (Grand Total) 7586 


According to State Geologist I. C. White, the temperature readings in 
Fahrenheit degrees were as follows: 


Depth Temp. Depth Temp. Depth Temp. 
100 ft. 55.6 2000 ft. 74.9 5000 ft. 114.2 
500 ft. 60.2 2500 ft. 81.0 6000 ft. 132.1 

1000 ft. 65.3 3000 ft. 87.6 7000 ft. 153.2 

1500 ft. 67.8 4000 ft. 100.0 7310 ft. 156.3 


Potash salts form the basis of the most important economic treasures 
discovered incidentally to the drilling for oil. They were found in the 
Staked Plains region of Texas by scientists of the U. S. Geological Sur- 
vey and the Texas Bureau of Geology and Technology operating under 
Director Udden of the latter. Potash is one of the few essential mineral 
substances in which our country has not been self-sufficient so far. Un- 
scrupulous promoters have already seized upon its agricultural and in- 
dustrial importance; and warnings have been issued by the United States 
Geological Survey to prospective potash investors regarding the exag- 
gerated claims set forth as to the thicknesses of these deposits. Rarer 
even than potash are the medicinal ichthyol and the non-burning and inert’ 
helium. The former is found in mineral oils from California and Texas; 
the latter as part of the natural gas emanating from petroleum in limited 
localities of Kansas and Texas. 


CHAPTER III. COMMERCIAL GEOLOGY OF 
MAJOR AMERICAN FIELDS* 


Petroleum is as widely distributed geographically as geologically. 
The largest physiographic province of the United States, namely, the 
Interior Plains, was the source of more than 50 per cent of the oil pro- 
‘duced during 1922. This province takes in the Appalachian field in the 
plateau of the same name, the Lima-Indiana field of Ohio and Indiana, 
the Illinois-Indiana field, and practically all of the Mid-Continent field, the 
Sabine uplift being (geographically) included with the Gulf Coast field in 
the Coastal Plain. The Rocky Mountain element comprises the fields of 
Colorado, Wyoming, and Montana. The California valley and Coast 
Range embrace the fields of southern California. 


. < a mos FIG. 3. DISTRIBUTION OF THE IMPORTANT OIL-POOLS OF THE UNITED STATES 
Adapted from a map published by Arthur D. Little, Inc. 


1 wiscONstn 


foe a aces mre ee 


ay Vee" 

Ge * 

5 mf 1 
Td Py 


6 \< . * 
312 ap Oo C od yy we 
86. g — 
fe S = SUNBURST FIELD ' 
° 


Kor, 0 \s 
% be MONTANA 
\ x 


st Fi 


@ BLACK GIRCLES REPRESENT PRODUCING CENTERS OR POOLS WHICH ARE 

INDIVIDUALLY NOTABLE, THOUGH OF VARYING PROMINENCE. THEY MAY BE IDEN- a 
IFIED BY THE ASSIGNED NUMBERS, WHICH REFER TO THE LIST AT THE BOTTOM 

OF THE MAP, 


LB = LONG BEACH FIELD, CALIF. C = POWELL FIELD 


\ s EAST CENTRAL TEXAS 
2 


O UNFILLED CIRCLES REPRESENT PRODUCING AREAS OF SECONDARY IMPORTANCE, 


BOUNDARY LINES INDICATE THE KNOWN EXTENT OF THE MAJOR FIELDS. SF = SANTA FE SPRINGS F, CALIF 


—Courtesy of Wiley & Son, Ince., publishers of Pogue's “Heonomics of Petroleum.” 
THE SEVEN MAJOR OIL FIELDS OF THE UNITED STATES. 
There are many new pools not shown by the dots on this map, particularly in Oklahoma. 


Within the limits of the outlines of each field lie large dry areas and larger untested areas. 
Additional prospective oil territory is shown on a map in The Literary Digest, Nov. 10, 1923. 


The Mid-Continent Field. Commercial usage, largely determined by 
the quality of the oils, has added the pools of Arkansas and North Louisi- 
ana to the Mid-Continent field proper. The main oil areas of this field 
are situated in a broad belt extending from Kansas City south through 
eastern Kansas and northeastern Oklahoma, thence southwest through 


*Based largely upon two Government publications: (1) “World Atlas of Com- 
mercial Geology,” part I, by J. B. Umpleby and others, issued in 1921 and for sale 
at $2.00 by the Director, U. S. Geological Survey; and (2) “Manual for the Oil and 
Gas Industry,” revised in 1921 by A. H. Fay, 0. H. Reinholt, and other valuation 
engineers of the Treasury Department and for sale at 25 cents by the Superintendent 
of Documents, Washington, D. C. A. C. Bedford recently wrote in Foreign Affairs: 
“Petroleum is the most uncertain of natural resources. Broadly speaking, it is 
impossible to tell today where oil will be found tomorrow, and having been found, 
exactly how long the supply will last.’’ : 


(31) 


ITS TREASURES AND TRAGEDIES 


OILDOM 


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OILDOM: ITS TREASURES AND TRAGEDIES 33 


south-central Oklahoma into north and central Texas as far as Brown 
and Limestone counties. It may be extended as far west as the Texas 
“Panhandle” to take in the Amarillo gas pools in Potter County and the 
minor oil pools in Carson and Hutchinson counties. 


Most of the oil produced in Kansas, Oklahoma, and northern Texas 
is obtained from beds of standstone in formations of the Pennsylvanian 
series. Limestone beds are of much less importance. The “sands” are 
generally between 25 and 75 feet thick, but range up to 300 feet (at 
Healdton). In southern Oklahoma some oil comes from the “Red Beds” 
of the Permian series. The-oil found in southern Arkansas, northern 
Louisiana and central Texas is obtained from structures in sandstones or 
other porous rocks of the Cretaceous and Tertiary systems. In the Mid- 
Continent field the oil gathered in anticlines, domes, and terraces through- 
out an extensive region where the strata have a general westerly dip. The 
depth to production varies from 200 to 3,500 feet, the shallow wells being 
along the eastern edge of the belt and the deeper wells being confind to 
the western part. The wells are preferably drilled with standard tools, the 
rotaries being used as a rule only in parts of Texas and in the “‘Red Beds” 
of Oklahoma. Drilling and production cost more than in the Eastern 
states, although less than in Wyoming and parts of California; hence 
pumping cannot proceed to so low an economic limit as in the Eastern 
states. Well spacing is from 2 to 10 acres per well. Recovery of oil per 
acre is generally less than in California and in the Gulf Coast. 


Mid-Continent Oil is almost invariably of paraffin base, and the weighted 
average gravity is about 36 degrees Baumé. It grades in appearance and — 
gravity from the thick, black oil of Smackover and some Louisiana pools 
with a gravity of about 20 degrees, to the almost colorless product of the 
so-called “gasoline well’ near Cushing, Okla., with a reported gravity 
above 55 degrees. The usual gravity range, however, is from 30 degrees 
to 45 degrees Baumé and the prevailing color is light green. The world’s 
most productive light oil field is Tonkawa, in Kay and Noble counties, 
Oklahoma, where the average gravity is 43 degrees. 


The Mid-Continent field is more pre-eminent in production than in re- 
serves. During the past few years it has been yielding about half of the 
oil produced in the United States; but on January 1, 1924, it holds hardly 
ene-third of the total reserves. 


The California field may be divided into 3 geographic sub-provinces. 
One covers both sides of the San Joaquin valley and is known as the 
Valley “fields” or districts; another takes in the many small and separate 
districts in the mountainous Santa Barbara and Ventura counties; and the 
third comprises the districts of the southern coastal plain in Los Angeles 
and Orange counties. Except for the Kern River pool the Valley districts 
lie on the west side of the valley and all get the oil mostly from Tertiary 
sandstones that have been folded. Sharp anticlines constitute the con- 
trolling type of structure, yet much oil has come from monoclines and 
synclines. Similar in many respects are the Coastal districts although dis- 
playing an even greater variety of structures, but sealed faults are fewer. 
An insignificant part of the California petroleum is obtained from Cre- 
taceous formations. Compared with the Gulf Coast field of Texas much 
less oil has migrated from the Tertiary up into the Quarternary beds. A 


1. (Above) A KERN COUNTY FIELD 
IN SAN JOAQUIN VALLEY, CALIF. 


Note the open “oilduct’” for carrying 
the heavy oil down grade more easily 
than in pipe line. 


2. AN OIG FIELD IN THE COAST 
RANGES OF CALIFORNIA, VEN- 
TUBA, COUNTY: 


The topography and the _ political 
division suggest ‘‘nothing venture, noth- 
ing have,’ a rule in oil hunting. 


3. LLUNTINGTON:~ FEED 9 EN IDE 
COASTAL PLAIN. 


View of a young field from the ocean. 
It is generally regarded as within the 
Los Angeles basin. 


—Oil and Gas Journal. 


—U. 8S. Geol. Survey. 


—Calif. Chamber 


of Mines and Oil. 


OILDOM: ITS TREASURES AND TRAGEDIES 35 


marked feature of the California occurrences is the great stratigraphic 
range throughout all the four series of the Tertiary system which, in the 
Sunset-Midway district becomes 18,000 feet thick. Producing horizons ap- 
pear anywhere from 300 to over 5,000 feet below the surface. Oil seeps are 
numerous, and asphalt beds cover wide areas. In no other region in North 
America is oil found in commercial quantities where the structure is so 
complicated and where the surface indications are so abundant. The 
California oils vary in color from black to honey-yellow and in gravity 
from 9.9 degrees to 54 degrees Baumé, the average having recently risen 
from 22 degrees to 28 degrees. Heavy dark oils predominated until the 
light oil pools were developed near Los Angeles, 1921-1923. 


TT CNTs 


i ee wo Sette ee iy My a é or ae 
caer aii 7 ¥". Alhdimbragi~# San Gabriel . d : 
as Pree Ae tt El Monte a a, N-Cuamanga 


My, = Pomona ~~ Ontario 


\everice Ry 


\ WP” 


Fullerton #8, CHAD 


BAA Ew ws He Garden Grove » Ry 


WY ong Bea 
.. ‘Sel Bonk < i Westminster,» 
¥5an Pedro 4 
Oe 
NE 5407 


Am. Inst. Min. and Met. Engrs. 


LOS ANGELES BASIN SHOWING OIL FIELDS, 1923 


Near the middle of this map is seen California’s greatest individual field, Sante Fe 
Springs, which reached a record of 350,000 bbls. daily during the summer. In 
November, Long Beach or Signal Hill, 10 miles southwest, passed the champion on its 
decline but reached a peak of hardly 275,000 bbls. daily, 50,000 less than Powell in 
Texas. The newest pool, not outlined here, is Compton—halfway between Santa Fe 
Springs and Torrance-Redondo. (Map drawn by Wayne Loel.) 


“The most striking features in the three newly discovered fields in 
the Los Angeles basin are the enormous thickness of oil sand’’* and the 
limited producing area from which are coming 23 per cent of the coun- 
try’s petroleum at the present time, May-June, 1923. At Long Beach a 
thickness of over 1,500 feet has been penetrated to the depth of a mile. At 
Santa Fe Springs the oil sand is said to be even a little thicker, and at 
Huntington Beach certainly not any less, the horizon being the same in all 
three of these fields, California’s total oil-bearing area is considered to be 


*Ralph Arnold and Wayne Loel in Mining and Metallurgy, May, 1923. 


36 OILDOM: ITS TREASURES AND TRAGEDIES 


about 1,500 square miles,* or nearly 1 per cent of the area of the state. 
Out of this, practically one-tenth only has been proven or is at present 
productive. About 30 square miles, or 20 per cent of the proven area, 
lies in Los Angeles and Orange counties which contain the above named 
new fields. These three together cover but 5,300 acres or less than 9 
square miles, but they were in June, 1923, contributing at a rate equiva- 
lent to one-sixth of the world’s total. 


—Oil and Gas Journal. 


THE FIRST POOL FOUND IN THE GULF COAST FIELD. 


Spindle Top, near Beaumont, Texas, was discovered January 10, 1901, and 
became the leading pool of the United States in 1902. It has produced about 
50 million barrels and is’ still active. See Chap. IV. 


The Gulf Coast field of Texas and Louisiana ranks third in respect to 
reserves, possessing 20 per cent as of January 1, 1924. Moreover, its pres- 
ent rate of production, 5 per cent of that of the whole country at the middle 
of 1923, places it far below California. This field includes that part of the 
Gulf Coastal Plain in which petroleum is associated with masses of rock 
salt and gypsum in domes. The oil-bearing strata are Cretaceous to Quar- 
ternary in age, and the reservoir rock is generally either sandstone or dolo- 
mitic limestone. In this coastal belt rise more than 40 low domes above 
the general level. They are supposed to be the surface marks of the salt 
domes which are beneath and which are known to produce some oil or 
gas. Few of the pools are more than 3 miles in diameter. The reservoir 
rock is generally either sandstone or dolomitic limestone, and the oil itself 
has an asphaltic base. The value of some of the oil is impaired by its high 
sulphur content—up to 2.3 per cent. The gravity ranges from 15 degrees 
to 32 degrees, averaging 22.5 degrees, Baume. Most.of the oil is dark brown 
to black, but some is green and rich in lubricating constituent. Any re- 
lation between color, gravity, and content of sulphur is not apparent. The 
zones of production vary from a few feet to hundreds in thickness and 
from 100 to 4,100 feet in depth. The rotary drill is used almost ex- 
clusively and consequently the correlation of the various sands is difficult. 


The Rocky Mountain field comprises all areas that produce petroleum 
in Colorado, Wyoming, and Montana, as well as some areas of prospective 
production in Utah and New Mexico. The oil is derived from beds of 
Pennsylvania, Permian, Triassic, and Cretaceous age. Most of the oils 


* State Mining Bureau, quoted in The Oil Weekly, June 17, 1922, 
**V. B. Ellzey in The Oil Weekly, May 12, 1923. 


OILDOM: ITS TREASURES AND TRAGEDIES 37 


from pre-Cretaceous beds are dark and heavy, with gravities averaging 
23 degrees Baumé, the heaviest being of 11 degrees. The Cretaceous oils, 
contrary to expectation, are remarkably light in both color and weight. 
Their gravity ranges from 25 degrees to 50 degrees Baumé, while the 
average gravity for the Rocky Mountain field is about 37.5 degrees. 
Worthy of special mention is the Cat Creek oil from Montana. It has a 
paraffin base, contains little sulphur, and is 8 degrees lighter than the 
average Appalachian oil or 18 degrees lighter than the average Mid-Con- 
tinent oil. Its gasoline content is 1% times that of Appalachian oil and 
twice that of Mid-Continent oil. No other pool in the United States of 
the same size as the Cat Creek yields such a quality of crude product. The 
Rocky Mountain reserves as of January 1, 1922, were estimated to be 


—Photo by the Author, Sept., ’23. 


THE LARGEST OF THE ROCKY MOUNTAIN FIELDS IN AREA. 


The Kevin-Sunburst Pool, found in the spring of 1922 by Gordon Campbell, is 
again referred to in Chapter VI. 


about 7% per cent of all our American reserves, Wyoming alone being 
credited with 6 per cent. The rate of production on July 1, 1922, equaled 
5.6 per cent of that for the whole country. Since the discovery and initial 
development of the Kevin-Sunburst field, probably the largest single Amer- 
ican pool in point of area, the estimate of oil reserves has been raised so 
as to make nine per cent of the total. 


The Appalachian field still retains underground almost 1 billion barrels 
or eight per cent of our total reserves after producing about 11% billion 
barrels in the course of the past 64 years. The present rate of yield is 
about 4 per cent of that for all the fields. This field embraces every 
pool east of central Ohio and north of Alabama in an elliptical area having 
a major axis trending northeast and southwest. Besides southeastern Ohio 
it includes the petroleum territory of New York, Pennsylvania, West 
Virginia, Kentucky and Tennessee. The oil-bearing strata are chiefly 
sandstones and conglomerates of Devonian, Mississippian, and Pennsyl- 
vanian age. These porous rocks produce from depths of 100 to 4,000 feet, 
the shallowest horizons being found in eastern Kentucky and the deepest 
in West Virginia and southern Pennsylvania. The typical oils are of 
paraffin base, are free from asphalt and objectionable sulphur, and give 
up to 79 per cent of kerosene, gasoline and lighter products by ordinary 
refining. They range in color from black to light amber, but most of them 
are of green shade. In gravity they run from 25 degrees to 53 degrees 
Baumé and average 41 degrees. 


38 OILDOM: ITS TREASURES AND TRAGEDIES 


The Illinois field, confined largely to the southeastern part of the state, 
with small scattered pools in the central and western parts, ranks 6th in 
the matter of reserves, having hardly 5 per cent of the 9 billion barrels 
of oil still obtainable in the United States early in 1922. The present rate 
of output, about 10 million barrels yearly, would afford a long life to the 
Illinois field, considered as a whole. Most of the oil comes from sandstone 
beds in the Pennsylvanian and Mississippian series of the Carboniferous 
system. The oils in ‘the northern part of the field are heavy, have an 
asphaltic base, and carry sulphur. Those in the southern part are of better 
grade. The gravity ranges from 27 degrees to 37 degrees Baumé. The 
richest area of this field is in Lawrence County, where 7 sands are encoun- 
tered at depths of 450 to 2,000 feet, with the richest at the bottom. 


The Lima-Indiana or Trenton field is of least importance from a quan- 
titative standpoint. Its reserves make but % of one per cent of our grand 
total and its recent rate of production makes but half of one per cent 
of the aggregate rate for the United States. It embraces all the pools in 
northwestern Ohio and most of those in Indiana. The oil-bearing beds in 
this field belong to the Ordovician, Silurian and Carboniferous systems, 
but the most productive are lenses of porous dolomitic rock in the “‘Tren- 
ton” limestone, a member of the Ordovician system and the oldest known — 
oil-bearing rock in the United States. This lies 1000 to 1500 feet deep in 
Ohio pools and averages 1000 feet in Indiana. The oil from the Carbonifer- 
ous rocks in southwestern Indiana properly belongs to the Illinois field, for 
the formations occupy the same structural basin and the two “‘fields” or 
districts are continuous. The oil in the pre-Carboniferous strata of the 
Trenton field is of lower grade than that in the same strata of some parts 
of the Appalachian fields and contains sulphur compounds that must be 
removed by special treatment. In color the oils range from green to brown 
and in gravity they average nearly 36 degrees Baumé. 


Canada. Indications of petroleum have been observed in many parts 
of Canada, but no fields have been much exploited except those in Ontario, 
where the oil occurs in sandstones and limestones of Silurian and Devonian 
age, and where the rate of output is now insignificant. The oil there has 
a paraffin base and a large percentage of sulphur. It comes from a depth 
of 200 to 500 feet. The Calgary field has furnished a small quantity but a 
field farther north in Alberta gives greater promise. In the Mackenzie 
field, during 1920, oil flowed from a depth of 100 feet and gushed from 
800 feet. Up to August, 1923, the developments have proven rather dis- 
appointing, particularly in the western part. However, continued search 
may bring results now that new Montana fields have been found close to the 
Dominion line. Canada’s petroleum reserves have been estimated at 2000 
million barrels, a comparatively high figure, considering past production, 
but not inconsistent with the great expanse of favorable formations as yet 
scarcely scratched with test borings. Fortunately, the more accurately 
measured coal resources are immense, Alberta alone possessing 17 per ’ 
cent of the world’s known coal or 70 to 80 per cent of Canada’s coal 
deposits. 


OILDOM: ITS TREASURES AND TRAGEDIES 39 


SUMMARY OF SALIENT FACTS ABOUT THE PETROLEUM RESOURCES OF 
UNITED STATES 


Region or Major Proven Average Yield to Recoverable Reserves 
Field and States Area Gravity Jan. 1, 1924 Jan.1,1924 Original 
Miles? Degrees B. Millions of Barrels 
MID-CONTINENT 
Quintet Arka; Kan. Da... cs. 1,500? 35.9 2,550 3,450 6,000 
CAE EOEUIN LAO oe 2 ce 6 6s eters a os 175 21.9 1,800 2,700 4,500 
GULF COAST ; 
PGT Pa TTISIA TAG oo is ages aoc PAT) (i 22.4 470 2,330 2,800 
APPALACHIAN 
Pao ago: eX O..« W. Vas, KY., 
NST TST eae ner Gre Spe eR a eae ae 2,500 40.8 1,380 920 2,300 
ROCKYSMOUNTAINS. ©... ccs cn 6 700? 37.5 175 1,025 1,200 
Wy., Mont., Colo. 
LEM LNOLS= UN DIANAS icswe es Fe 350 ? 32.5 350 500 850 
LS S.2W. 10d. 
ASIN) EC ACNPACH ese oc. gt ches ete vets aes 500 35.9 460 | 90 550 
N. W. Ohio, N. BH. Ind. 
UNITED STATHS 
POLI ET OVERS Sie cok aie Satie 87s 5,750 32.0 7,185 11,015 18,200 
MTSCHLIAMGCOUS) = AtoeGid cles pie ec aoe 250 ? 2 None 800 800 
Cora Mee LO UAE secrete ee alenie 6,000 32.0? 7,185 11,815 19,000 


REMARKS. The general areas of production, as shown on generalized maps, are 
much greater. The actual areas of proven territory take in both producing and 
undeveloped oil land. They are rather well defined in California and in the Appa- 
lachian and Lima-Indiana fields. In roughly determining the Mid-Continent area there 
were considered the total number of oil wells, their spacing of 6 or 7 acres per well, 
and the likely percentage of proven but undeveloped acreage. In the case of the Gulf 
Coast, statistics published in The Oil Weekly indicate an area of 5,700 acres for 11 out 
of the 21 local fields or salt domes that have produced on a commercial scale; and 
with this as a basis a liberal allowance has been made for the acreage of the other 
10 and for the undeveloped areas, the total being likely a little less than 25 square 
miles—a remarkably limited area for so large a production to 1924. In the Appa- 
lachian field there is an additional area of 1,700 square miles of productive gas terri- 
pas In other fields their minor areas are included where not separated in the original 

ata. 

Gravities given are on the Baume scale. They are all weighted averages, consid- 
ering the relative yield of different grades within each major field, and were pub- 
lished by the U. S. Geological Survey in October, 1922. The only radical correction to 
be made is for California, where the average quality of the crude oil was raised to 
an extraordinary extent within a year’s time due to the light oil development of the 
Long Beach and Santa Fe Springs fields near Los Angeles. The average has risen 
from 21.9 to fully 28 degrees if not higher. The heavy Smackover oil of Arkansas, 
ee. not Mid-Continental, has been offset largely by the light Tonkawa oil of 

klahoma. 


TANKER IN WAR-TIME PAINT, LOS ANGELES HARBOR 
Tankers were largely instrumental in winning the war for the Allies by carrying fuel 
oil and other products across the Atlantic. 
—Courtesy of Union Oil Co., of Calif. 


CHAPTER IV. MECHANISM OF THE AMERICAN 
INDUSTRY. - 


Engineering Aspects. Next to the natural resource as a foundation 
for the Oil and Gas Industry stands the development of tecnnologic methods 
for finding, obtaining, transporting, treating, and utilizing the crude 
petroleum and natural gas. Were it not for the wonderful work of both 
the geologist and the engineer-technologist, the one in exploring for new 
deposits and the other in striving to procure maximum recovery of the 
crude oil and maximum efficiency in the refining and use of the product 
at a minimum cost and with a minimum waste, the industry would not have 
attained to one tenth of its present proportion; and consequently would 
neither attract millions of investors nor give employment to many thou- 
sands of wage earners. * 


Since the beginning of the petroleum industry in 1859, up to five or 
six years ago, there has been a dearth of engineers who have had the fun- 
damental technical training and also sufficient practical experience so 
that they could compete with purely practical men. About 23 years ago, 
Captain Anthony F. Lucas, a mining engineer, resorted to the rotary pro- 
cess in drilling an 1100-foot well, and brought in one of the greatest 
gushers ever found within the United States. The mechanical accom- 
plishment was then overshadowed by his discovery of commercial oil in a 
Gulf Coast dome which rises but 12 feet above the prairie at Spindle 
Top, a little south of Beaumont, Texas. Previous to that time almost all 
American wells were sunk with cable tools. With a few similar exceptions, 
and “until recently, comparatively little attention had been given by the 
engineering profession to the petroleum industry except in storage, refining 
transportation and natural gas.’ 


Conservation of underground reserves has been initiated by engi- 
neers, notably in California where it has been carried on through the co- 
operative work of the operators with the State Mining Bureau. Along 
this line of endeavor “it is now universally recognized that the minimum 
protective work necessary narrows down to two requirements: 1. Ex- 
cluding water from the production of the well; 2. Preventing the migra- 
tion of water, outside the casing, from water bearing formations to oil 
or gas bearing formations.” ‘‘The proper setting of casing, cementing off 
water, checking productivity of individual wells, correct plugging of dry 
and abandoned wells, and various other conservation methods established 
elsewhere” were in 1918 being adopted in Oklahoma as a direct movement 


*The president of a large Mid-Continent producer has calculated, from extensive 
records, that 85 per cent of the wells located on the basis of careful geological sur- 
veys: proved productive, whereas only 5 per cent of the wells located at random were 
successful. Pogue’s Economics of Petroleum, p. 348. 

Writes the editor of the Oil and Gas Journal: In the oil business in the old 
days, but slight attention was paid to technical matters. The refiners were obliged, 
of course, to know things scientific, but the producing men were guided largely by 
every-day experiences. Main strength plus practical knowledge of the routine work 
were the essentials then as they still are to a large extent. Nevertheless, there are 
now opportunities for genuine “efficiency”? men in oil producing work. Many of the 
big concerns are profiting by the skill of technically trained men. In the refining 
industry the “highbrow” is more in demand than ever before. 

7 E. W. Wagy, Pet. Engr., Bureau of Mines, in the Oil and Gas Journal. 


tg (40) 


OILDOM: ITS TREASURES AND TRAGEDIES Al 


toward the saving of crude oil. The use of cement in oil wells not only 
conserves the supply of the raw material but it also conserves capital and 
enhances the profits, as in the case instanced below. 

“On 141 wells in the Cushing field that had been put back to pro- 
ducing after cementing, there occurred an immediate increase in yield of 
4,304 barrels daily. At the quoted market price of $2.25 a barrel (in 


CAPT: ANTHONY FE. LUCAS. 


The pioneer of the Gulf coast 
fields; first to use the rotary for 
drilling oil wells; and the indirect 
founder of the first great independ- 
ent operators, the Gulf and the 
Texas companies. 


At the right is shown the LUCAS 
GUSHHER, greatest oil well ever 
drilled in the United States. It 
came in Jan. 10, 1901, at 75,000 to 
100,000 barrels a day. Since then 
the Gulf Coast field has produced 
about 500 million barrels of oil. —Courtesy A. F. G. Lucas. 


May, 1919) this quantity was equivalent to $9,684 a day, and at $3.00, 
the price at which most of the oil was actually sold, it was equivalent to 
$12,912.”’ At that rate the additional production would mean almost 
$4,000,000 in one year compared with the probable cost of less than 
$75,000 for cementing the 141 wells. Besides the increased yield there 
was likewise effected a large saving in the labor required, amounting to 
40% of that involved before cementing; also a lower rate of deterioration 
in well equipment due to the absence of salt water.* 

Similar results have been accomplished by the U. S. Bureau of Mines 
in co-operation with the Rocky Mountain Petroleum Association in Wyom- 
ing. A-well which had been standing full of water was repaired and com- 
pletely recovered. One month’s production therefrom was worth more 
than the cost of the four men’s services for one year. Notwithstanding 


*“Recementing Through Tubing Under Pressure,’ by C. C. Thoms, California 
Oil Fields, July, 1920; and U. S. Oil Inspector’s report to the Superintendent for the 
Five Civilized Tribes of Oklahoma. 


42 OILDOM: ITS TREASURES AND TRAGEDIES 


the various advances that have been made in the line of enlarging the’ 
ultimate recovery from sands, there still remains a very large margin for 
improvement in view of the serious fact that 80 to 90 per cent of the un- 
derground oil is unrecoverable by the prevailing production methods. 
‘Profits from the industry will be immensely increased when the relative 
recovery equals or exceeds the much higher rate of that otherwise back- 
ward branch of mining, the under-engineered and over-capitalized coal 


industry. 


—U. S. Geol. Survey. 
THE GREATEST FIELD FOUND IN THE UNITED STATES BEFORE 1928. 


Only part of the Drumright division of the Cushing pool is shown here with 
wells along the Cimarron river in Creek Co., about 25 miles west of that other 
great pool, the Glenn. Cushing, surpassed nationally by Powell and Santa Fe 
Springs fields alone, was found by W. S. and R. HE. Vandruff,. geologists and 
former associates of the author, one year before the first well was drilled in 1912. 


In the chronological order of their realization, the three most import- 
ant and profitable applications of technology in the near and not very dis- 
tant future pertain to (a) the use of core drills in wild-catting rather than 
in developing, (b) the sinking of shafts for the mining or draining of 
pumped and abandoned sands, and (c) the extraction of oil from the ex- 
tensive deposits of bituminous shales found in certain Rocky Mountain 
states and in Kentucky and other Allegheny plateau states. Shale oil has 
no immediate value and will receive little consideration in this edition. 

Production engineers, constituting a new class of petroleum tech- 
nologists, may soon perfect American methods for mining or draining 
residual reservoirs in old fields or pools as advocated by Albert H. Fay 
in the Ow and Gas Journal, May 28, 1920. Intrenched in their ignorance, 
some apparently intelligent operators scorn this idea, claiming it has never 
been done. As a matter of fact, while shaft-sinking failed in the early 
boom days at Petroleum Center, Pa., tunnelling for oil was successfully 
undertaken in California about the same time. Actual mining of petroleum 
sands was carried on by Frenchmen in Alsace from 1735 to 1865 at 
depths of 35 to 220 feet. Such operations, on a new principle, were 
resumed in 1916, with the result that 2 to 5 times as much oil was thus 
extracted as by the ordinary well-boring process. In Estill County, 
Ky., during May, 1921, D. W. R. Kinney began sinking a shaft, concrete 
lined, and on reaching the sand at 185 feet got 4 to 5 barrels of oil a day. 


OILDOM: ITS TREASURES AND TRAGEDIES 43 


In the meantime, and until mining methods have been adopted, pro- 
duction engineers have resorted to other and temporary expedients to ex- 
tend the extraction beyond the present limit of 10 to 20 per cent. The 
compressed air process has spread to some pools and properties where ordi- 
nary pumping has reached the economic limit, particularly in the Appa- 
lachian field. Some old properties there have been rejuvenated so as to 
yield, in this way, from one-half to equally as much as the entire past pro- 
duction. Flooding partly exhausted sands with water has also proven satis- 
factory, as in the Bradford field, Pennsylvania, where this process was 
initiated in 1890.* 


MINING OIL SANDS AT PECHELBRONN, ALSACH, SINCE 1735. 
French and German miners sank shafts and drove galleries for 147 years before 
a well was drilled in 1882 to a depth of 465 feet and gushed 500 barrels daily. (See 
pages 16 and 72.)— Rig and Reel Magazine, Parkersburg, W. Va. : 


Conservation of capital through core drilling. Out of 750 million 
dollars lost the last five years through unsuccessful drilling for oil, largely 
legitimate wild catting at that, at least 250, possibly 500 millions could 
have been conserved through eliminating the old fashioned, cumbersome, 
and costly cable and rotary systems and the substituting therefor the 
more reliable and scientific systems of drilling for exploratory purposes. 
Sixteen years ago, or four years after introducing core drilling into the 
Philippines,j the writer advocated the use of diamond drills in testing 
virgin territory for oil on the Pacific slope. Only during the past five 
years have the progressive California operators begun to appreciate the 
various advantages gained by spending a little time and money on coring 
of one kind or another. ‘ 

-The more conservative companies have hesitated to abandon entirely 
their practice of boring a big hole from the very beginning or “spudding 
in;”’ and so have tried to adapt the antiquated systems to the cutting of 
cores out of the strata as occasion required it. The Keystone Drilling Co., 
of Beaver Falls, Pa., has improvised a device for extracting a short core 

*See “Causes of Increase in Yield,’’ Chapter V; also, for technologic details read 
chapter by L. C. Sands in vol. I, Day’s ‘‘Handbook of the Petroleum Industry,” pub- 
lished by John Wiley & Sons, 4382 4th Ave., New York; see also “Highty Per Cent of 
Oil Not Recovered,’ by K. C. Heald, of the National Research Council and U. S. 
Gevlcescel Survey, in The Oil and Gas Journal, Oct. 18, 1923. 


; See the author’s illustrated article on the U. S. Army coal mines in The Engi- 
neering Magazine, January, 1906; or the Review of Reviews, February, 1906. 


44 OILDOM: ITS TREASURES AND TRAGEDIES 


while operating the ordinary cable tools. In connection with rotary tool 
drilling for production in the Gulf Coast region one company transformed 
a piece of common pipe into a combination core-barrel and cutting tool by 
making chisel teeth at the lower end thereof and bending alternate teeth 
inwards to hold the core. It cuts like an ordinary post-hole auger. Ac- 
cording to R. E. Collom, some companies have been using a coring device: 
in soft formations in which the core barrel is incorporated in the center 
of a fish-tail bit. Suman states that a certain Gulf Coast driller uses a 


EFFICIENT AND NON-WASTEFUL 
WAY OF HXPLORING FOR FUEL 
DEPOSITS. 


The first systematic attempt to pros- 
pect the mineral resources of the Philip- 
pines. This was done at the U. 8S. Army 
coal mines where the author served as 
superintendent of explorations, asso- 
ciated with Major H. L. Wigmore, in 
1903-4 while Chief Justice Taft was 
Governor. Credit is due the progressive 
Corps of Engineers, U. S. A., for thus 
introducing a_ scientific and practical 
method for finding truth and conserving 
capital. The first drilling for oil in the 
Archipelago began a little later, but un- 
fortunately cable tools and not core 
drills were used. (See Chapter VIII for 
recent drilling in the Islands.) 


—-The Engineering Magazine, Jan., 1906. 


DIAMOND DRILLING IN THE 
PHILIPPNES. 


piece of common pipe with a V-shaped notch cut in the lower end. Upon 
rotating this at the bottom of the hole it has cut cores from 8 to 10 feet 
long, and these became wedged in the barrel by dropping into the drill 
stem small pieces of cast iron. This last appears to be an independent 
imitation of the more perfected Okell core drill manufactured in Los 
Angeles and used by the Shell Company and others in drilling through 
both hard and soft formations. A contrivance more complicated but easily 
repaired has been used by van der Gracht for coring in soft formations 
with rotary tools. 

Coring with the regular oil well rotaries in California has not proven 
altogether satisfactory. The heating of the core barrel through the rapid ro- 
tation volatilized or drove out the petroleum (or gas) from the sample en- 
tering the core barrel, and the latter, therefore, gave no reaction with 
ether.* On the whole, drilling systems designed primarily for development 
or production are neither so economic nor so dependable as the specially de- 
signed coring systems of usually smaller caliber but of equal or greater 
capacity in depth. 

Core Drilling in California Oil Wells.; ‘‘Core drilling, as practiced 
in California oil wells, is only for the purpose of taking samples at critical 

*The core is sometimes heated so intensely that it becomes hard to tell whether 


the rock is igneous or sedimentary—a very important matter—for it is a hopeless 
task ty drill for oil in granite or lava. 


¥. C. Merritt, Los Angeles, in Mining and. pee ae August, 1922. See 
also “Technique of Core Drilling,” by J. E. Hlliott, M. and » October, 1923. 


OILDOM: ITS TREASURES AND TRAGEDIES 45 


depths. The core drill is not intended to supplant the fish-tail bit in rotary 
drilling. Sampling by such method is necessitated since accurate well 
logs cannot be obtained by the rotary method. Oil sands are often ob- 
scured by the heavy mud used in rotary drilling, and may be easily pene- 
trated without the driller’s knowledge. The hydrostatic pressure of the 
mud-flush column at times suffices to drive the oil back into the formation 
so that no evidence of it may be seen at the surface. 


- Core drills have been evolved in California for the purpose of taking 
samples at frequent intervals when the expected depth of the oil sand 
has been reached. Only within the past year has an active campaign of 
core drilling been carried on in California, but at the present time it is 
the usual practice of many of the larger companies in the southern Califor- 
nia fields to takes cores at 10-foot intervals at promising levels. 


There are two general styles of such core drills in use, the single- 
barrel drill and the double-barrel drill.. The single-barrel drill consists of a 
length of drill pipe with teeth in one end. This contrivance is rotated in the 
bottom of the hole, and at the conclusion of coring sufficient weight is 
given the drill pipe to bend in the teeth. The double-barrel drill consists 
of two barrels, one within the other, both fitting into a steel shoe equipped 
with removable teeth. The mud flush passes between the two barrels to 
the bottom of the hole. 


Both types have advantages and disadvantages. The single-barrel 

drill is cheaply and easily made, but the cores extracted are not always 
reliable. As the mud flush does not reach the bottom by several feet, the > 
so-called cores cut by the single barrel are often only compressed cuttings. 
_ Furthermore, the generated heat is often enough to fuse the material, or at 
least to change into gas any oil that may be present in the cored material. 
The double-barrel drill extracts a true core without danger of contamina- 
tion by the mud flush, and without “burning,” but it is more expensive to 
make and to operate, and requires greater skill from the operator. 


Many of the companies are now using a core drill to locate the proper 
formation in which to cement the water string (of casing), and find that 
they have a greater percentage of successful water shut-offs by so doing. 
Geologists study the cores extracted so as to correlate shale strata by their 
contained micro-organisms. Sand cores are analyzed for their salt and total 
solubility content. The oil operator realizes that the core drill is the big- 
gest forward step made in the art of rotary drilling. He wants to evolve 
a type of drill that will retain the speed and simplicity of the fish-tail and 
at the same time preserve an accurate sample of the formations.” 


OPERATIVE DIVISIONS. 


Custom considers the petroleum industry divided into the four distinct 
functions of production, transportation, manufacturing and marketing 
from the standpoint of economic organization. Viewed otherwise, there 
should be added a fifth function, namely exploration, the operation of 
which is almost as peculiar to the oil industry as that of the others. It 
is gradually outgrowing the production division to which it has hitherto 
been subordinated. Synonymous already with scientific “wildcatting,” 


4 


.s) 


OILDOM: ITS TREASURES AND TRAGEDIES 


—Sullivan Mchy. 


Co. 


BORING FOR PRODUC- 
TION IN MEXICO WITH 
A DIAMOND CORE 
DRILL. 


A Sullivan “P-2” diamond 
drill showing pressure con- 
trol rig, rod brake and a 
saver of oil. Before 1922 
few operators would be- 
lieve that the diamond 
drill was good for any 
purpose except for testing 
wild-cat territory. In 
Oklahoma recently a well 
unfinished with cable tools 
was completed to a depth 
of 4,700 feet with a dia- 
mond core drill. 


DIAMOND DRILL BITS BEFORE AND AFTER FULLY SET. 


At left the blank bit shows socket chiselled out to fit irregular shape of a 
carbon or black diamond. Sheet copper is used to help make a snug fit. Clear- 
ance or projection on cylindrical face yaries from 1-64 to 1-82 of an inch. 


Water grooves are also shown. 


OILDOM: ITS TREASURES AND TRAGEDIES 47 


exploration as practiced by the efficient operators is fast coming to mean 
core drilling in connection with thorough geological investigations of sur- 
face signs. Drilling experimental wells—ordinary ‘“‘wildcatting’’—has 
stood at the base of the discovery of new oil fields without which the in- 
dustry would have dried up. For every field thus found, hundreds of 
worthless holes have been put down. Scientific wildcatting will not only 
minimize the number of resultless borings but will also cut the cost of 
each test at least in two, particularly in remote regions where transporta- 
tion, fuel and living conditions are controlling cost factors. 


Now that such enormous reserves of coal and ores of iron and copper 
have been largely measured by means of the diamond core drill the time has 
come that many of the skilled men and their machines can be released for 
the even more essential task of discovering new deposits of petroleum so 
as to maintain if not increase the relatively low ratio between known re- 
serves and current consumption or production. 


Exploration with the Diamond Drill. The diamond drill and the rotary 
oil drill work on the same general principles, the main difference being 
the ‘cylindrical steel bit set with ‘“‘carbons’”’ or black diamonds* which is 
used by the former instead of the fish-tail or other type used by the rotary, 
as already narrated. On account of the brittleness of the carbon and the 
danger of breakage if suddenly struck, it is not feasible to attach a dia- 
mond bit to the rotary drill stem. The operating mechanism of the dia- 
mond drill must be subject to much more sensitive control than the rotary 
drill. The bit must be rotated smoothly, without the jerks incident to the 
operation of the clutches and chain drives on the rotary draw works, and 
the feed must be controlled in a manner much more delicate than the 
action of a brake on a hoist. Accordingly, diamond drills are usually 
built as a self-contained unit with the crank shaft of the engine geared 
direct to the drive shaft that turns the drill rods. One or two hydraulic 
cylinders connected with a high pressure pump control the feed so definite- 
ly that the bit can be raised or lowered at will, while the bit is rotating, 
by the simple operation of valves. The smaller-sized drills for very shal- 
low work generally have a screw feed control instead of the hydraulic 
feed; and their portable nature adapt them for outlining structure where 
key beds lie less than 500 to 600 feet below the surface. The heavier 
drills are used for scouting, i. e., obtaining data as to the character of the 
oil sand and the quality of the oil.t The heaviest drills have lately been 


*The diamond drill has long been recognized as the most efficient method of 
recovering a continuous core in rock. All other drills use steel in some form for 
cutting, but this drill, as its name implies, uses a black diamond, found only,in Brazil. 
The black diamond 1s pure carbon or is chemically the same as the colorless gem, 
_ buat differs in crystalization and is tougher for use in industry or drilling. The great 

advantage of the diamond over steel cutters in core work is that it cuts freely and 
Maintains gauge. To core any distance this is essential as any loss in gauge means 
loss in clearance, with the consequent choking of the washing fluid, whether mud or 
water. A steady supply of wash water prevents heating of the cutting tool. The 
diamonds cut thousands of feet in soft sedimentary formation without appreciable 
loss in weight. <A steel tool quickly loses its edge in rocks that contain grit, 
Such as sandstone or sandy shales. This is the reason why the diamond, although 
expensive as to initial cost, is generally used in core drilling. Substitutes have been 
tried but nothing has successfully replaced the diamond. Both double tube and 
Single tube barrels are used with diamond drills. The double tube barrel is designed 
to have the inner tube suspended on ball bearings and not turn. Water passes 
down between the tubes, so the core is protected both from washing water and 
vibration.—J. S. Mitchell of the Sullivan Machinery Co., Chicago, Sept. 13, 1923. 


7 Clyde S. Longyear, of E. J. Longyear Co., Minneapolis, in Mini 
lurgy for May, 1923. ih FEI a Blea ld ee 


48 OILDOM: ITS TREASURES AND TRAGEDIES 


CORRECT CORE DRILLING 
WILL HELP PLACE THE 
PETROLEUM INDUSTRY ON 
A MORE ECONOMIC AND 
SCIENTIFIC BASIS 


Even if the diamond drill is 
used only for exploratory pur- 
poses and not for production, 
the accurate rock record 
makes it possible more intelli- 
gently to plan a proper cam- 
paign of development. It may 
prove advisable to get produc- 
tion first from the shallower 
sands which the ordinary ro- 
tary might have missed but 
which are evidenced by the 
more or less continuous cores 
like those shown here—3,400 
feet of 2-inch core from Toyah, 
western Texas. 


A DIAMOND CORE DRILL 
IN THE DEEPEST. FIELD 
OF THE UNITED STATES 


A Sullivan “I"K’’ machine 
in the Signal Hill field at 
Long Beach, Calif. It is here 
deepening a rotary hole from 
3,000 to 5,000 feet for the 
Shell Co. of California. Its 
hydraulic cylinder, at the up- 
per right in the view, can lift 
ordinarily 40 tons under 200 
lbs. pressure. This heavy duty 
drill is nominally rated for 
5,000 ft. but may go 7 000 ft. 
or more. 


—Sullivan Machinery Co. 


OILDOM: ITS TREASURES AND TRAGEDIES 49 


designed for drilling producing wells of a diameter greater than the mile- 
deep tests for gold bored in South Africa. 

Additional description of this near-ideal core drill accompanies the 
illustrations herewith. 

~ The advantages of diamond drilling for oil are summed up as fol- 
lows: By the removal of rock core, accurate records of underground con- 
ditions are furnished. It is more rapid than either rotary drilling or 
standard drilling. The drill operates equally well in soft and in hard strata, 
and employs mud fluid if necessary. It is adapted to structure testing, 
ordinary wildcatting, deepening other wells, and production drilling— 
making the hole of any size, to any depth, within reasonable limits.* Its 
use in the United States alone may save the investors as much as $50,- 
000,000 a year. 

Drilling and Operating Oil Wells.j The two types of drills commonly 
used in the drilling of oil wells are the cable tool and the rotary drill. The 
nature of the strata in the field in which the drilling is to be done is the 
determining factor in the selection of the drill. 

The cable tool, or percussion drill, is generally used in the fields where 
considerable stone or rock formation is expected to be encountered. This 
drill consists of a heavy steel stem some 30 feet in length and of varying 
diameter, according to the size of the hole to be drilled, the stem having 
a tool known as the “bit”? attached to the lower end. To the upper end is 
fastened a wire cable suspended from the top of a derrick and leading 
to a hoisting drum, around which the cable is wound. The derrick usually 
has a 20-foot base, tapering in pyramidal shape to a 4-foot top at a height 
of 80 feet and may be of wood or steel construction, its strength being 
conditioned upon the depth to be drilled. A soft formation where caving- 
in is likely to occur calls for a large hole because it is necessary to insert 
columns of casing as the depth of the well increases. In the case of very 
deep wells the diameter is usually large even though caving-in may not be 
expected. 

The drum is set in motion by a lever connected with the engine. The 
lever is controlled by the driller who raises and releases the tool stem, the 
impact of which forces the tool through the bed of earth and rock. If 
the drill strikes sand or gravel, a casing is put in to shut off the water, and 
then drilling is continued through the limestone, clay-shale, or other firm 
formation. After this formation has been pounded through, a casing about 

* Mining Magazine, London, October, 1922. Other worthy articles include: A. H. 
Fay’s “The Diamond Drill as an Aid to Oil Prospecting,’ Lng. and Mining Jnl., 
Dec. 11, 1920; “Producing Well Drilled with a Diamond Drill,’ 7’ampico Tribune, Mex., 
reprinted in the E. and M. J., Jan. 7, 1922; “Diamond Drilling in Oil Production,”’ 
I’, A. Edson, Oil and Gas Jnl., March 10, 1922; “Adapting the D. D. to the Oil Field,” 
I. C. Gill, The Oil Weekly, Aug. 26, 1922; and ‘Drilling Methods in Prospecting for 
Oil and Gas.” The Petroleum World, 32. Great St. Helens, London, E. C. 8, Eng., 
March, 1923. 

An inexpensive monograph on diamond drilling for oil, including a directory 
of drill makers and drilling contractors, which should help small Operators to save 
their funds and find the oil, can be quickly supplied if the demand is great enough. 
A card to the author will receive prompt attention. In the meantime the instructive 


catalog of the Sullivan Machinery Co., 122 So. Michigan Ave. hi isi 
desires for further details. ¢ : Ce 
+ From ‘Wages and Hours of Labor in Petroleum Industry,” U. S. Dept. of 
Labor, James J. Davis, Sec’y; BE. J. Henning, Asst. Sec’y. The author has slightly 
modified and supplemented this popular description which was published as Bulletin 
297, April, 1922.—Near the beginning of this chapter reference is made to Captain 
Lueas, who adapted the rotary principle of the diamond core drill to the diamond-less 
rotary drill in boring through quicksand and gumbo, where, in the Gulf Coast field 
the cable drill had proved useless. ; 


50 OILDOM: ITS TREASURES AND TRAGEDIES 


1% inches less in diameter is put in and continued down with the drilling 
until oil or another water sand is found or the well is abandoned as a non- 
producer. The formations penetrated may vary, but at a depth where it 
is thought there may be oil smaller casing and drills are used than at the 
beginning. At intervals during the process a bailer or clean-out tool is 
lowered into the hole to bring up the dirt and rock that have been loosened. 


CABLE DRILL—PORTABLE TYPE FOR SHALLOW FIELDS 


This is widely used and requires no fixed derrick. Many of the wells, 
from 1,200 to 1,700 feet deep, in the Sunburst or Kevin-Sunburst field, Toole 
Co., Mont., have been drilled with portable outfits as shown above. (Photo 
by the author, Sept., 1923.) , 


The bailer consists of a long tube having on the lower end a detachable 
valve and, like the tool stem, connected by a wire cable leading to another 
hoisting drum. When the drilling is completed and the well ‘‘shot”’ (see 
72) the bailing is continued until all the loose dirt and rock have been 
removed, and the well is then turned over to the production department 
for pumping. 

The cable tool system, in which the bed rock is broken up by pound- 
ing or chopping, was used for drilling 91 per cent of the 109,000 oil wells 
completed during the five years ended with 1918. 

The rotary drill has come into common use in oil fields where there 
is little or no stone or rock, because of the speed with which the drilling 
can be done in soft or caving formations. However, when obstructions in 
the nature of stone or rock are found in the path of the drill, there is used 
a specially designed tool, known as a “cone” bit attached to the drill stem. 


The rotary drill consists of a rapidly rotating pipe or stem on the lower 
end of which is attached a fish-tail or a diamond-point bit. To the upper 
end of the stem is attached a wire cable which suspended from the top of 
derrick, leads to a hoisting drum. The pipe or stem is rotated at the rate 
of some 200 revolutions per minute by a horizontal revolving disk through 
which the stem passes. The rotary disk is driven by chain and sprockets 
from the line shaft operated by the engine. 


OILDOM: ITS TREASURES AND TRAGEDIES 51 


Water and thin mud are pumped through the drill stem down into the 
hole and this forces the material cut away by the bit to rise to the surface. 
The mud also serves to cement the walls and prevents caving-in of the sides 
of the hole before the casing can be inserted. The casing is inserted in 
strings, the number and size depending upon the depth of the well. They 
are put in at different intervals of depth, seldom exceeding three strings, 
and ranging in size from 10 inches to 6 inches in wells to a depth of 
3,500 feet. After the drilling is completed and the well ‘“‘shot’’ the hole is 
““swabbed in.” 


ROTARY DRILL, 
SOUTHERN CALIFORNIA 


The overdevelopment in 1923 was 
made possible by the rapid rotary. This 
view was taken at Santa Fe Springs, 
Los Angeles County, in August, 1923, 
and shows the rotary drive sprocket 
(part of the draw-works), the turn- 
table or gear table (which has a central 
opening for admitting the drilling tools 
and drill stems), and several 60-foot 
sections of jointed drill pipe or stems; 
also the author and his young friend, 
Ted Wickersheim. 


(Rotary drilling is compared with the 
cable system in Chapter XVIII, “Busi- 
ness of Oil Production,’ by Johnson- 
Huntley-Somers. ) 


The swab is much like the bailer used in cable-tool drilling, except that 
between the stem and the valve is a large rubber tube which when com- 
pressed and released creates a vacuum. This draws the sand, etc., in to the 
tube, which is repeatedly lowered into and withdrawn from the hole until 
the well is “brought in” and ready to be “put on the beam” or turned 
over to the production department for pumping.* 


Pipe-Line Transportation of Crude Petroleum. To most people the 
tank car is not an unfamiliar sight, and those living on the seacoast may 
see the tank steamer. Formerly these two containers constituted the 
principal means by which crude and refined petroleum was transported 
from one section of the country to another. While both are still in use, the 
tank car, so far as the transportation of crude petroleum is concerned, has 
to a great extent been supplanted by the modern pipe-line system though 


*Because of the risk of running past a pay send with the rapid rotary, the cable 
system is customarily substituted when the sand is approached and the well is to be 
brought in. The costlier rotary method has been blamed in part for the overdevelop- 
ment in southern California where the race between competitors calls for rapid 
drilling. The deepest_hole ever drilled with rotary tools is the Brownrig-Keller 2 
at Santa Fe Springs, Los Angeles Co. It is being bored by the Standard Oil Co. of 
California and on October 6, 1923, had reached a depth of 7,212 feet from 7,130 feet on 
September 17. It was started on September 14, 1922. Deeper wells have been drilled 
with a diamond core drill in Europe and with cable tools in West Virginia. See end 
of Chapter II. A record for speed was made by the Shell Co. of California, when 
Drillers Dunn, Pyles and Sharp ran a rotary’ down 4,960 feet in 77 days, January 12- 
March 31, 1923, at Long Beach (Babb No. 2). 


52 OILDOM: ITS TREASURES AND TRAGEDIES 


—Union Oil Bulletin. 
A DEHYDRATION PLANT IN CALIFORNIA 


The Cottrell electrical process is used to remove the water from the emulsions 
of some oil wells before the crude product is moved any. distance. 


PROOUE TION 


RE 


WASTE SEEPAGE 


Leet o USE 


LOKOING KRACK 
3 7 & 


si 


BD nlf 


3 an 
Pipe LINE 
Pictoriac Diasram 
OF THE 
Crupe Oic Inpustryr 
Ea ib 102, U. S. National Museum. 


DIAGRAM OF THE CRUDE PETROLEUM INDUSTRY SHOWING ITS 
DEPENDENCE ON PIPE-LINE TRANSPORTATION 


Note the gathering lines from the wells to the lease or field storage which 
has smaller units than the tank-farm storage. A common unit of the latter 
holds 55,000 barrels. Tank farms contain up to 10 million barrels each. 


OILDOM: ITS TREASURES AND TRAGEDIES 53 


it is still the principal means of transporting the refined product, excepting 
in the coastwise, the import, and the export trade, where the the tank 
steamer is the more important carrier. 

The nearest thing with which the underground pipe-line systems of 
transportation are comparable is the water works system of a city; the for- 
mer being the reverse of the latter in operation, in that its system of arter- 
ies gather up the oil from the various wells and sends it to the trunk lines, 
thence to the refineries, while the water works system sends the water first 
through the main conduit, later distributing it to the homes of the people. 


Soo — 
g 


—Union Oil Bulletin. 


PIPE LINE TRANSPORTATION IN CALIFORNIA 


Carrying the line over the Rio Hondo near Los Angeles. This shows but one of 
many engineering problems connected with the oil industry. 


SANTA MARGARITA PUMP STATION, UNION OIL CO. OF CALIF. 


Few consumers of petroleum products realize how many sources of 
expense are attached to the crude oil industry alone. In this case the 
heavy, viscous, oil has to be heated as well as pumped. 


To emphasize the size of the modern system of oil transportation, it 
may be explained that the oil is pumped from the fields of Texas, Okla- 
homa, and Kansas to refineries along the Atlantic seaboard of the United 
States and to other refineries located in the Dominion of Canada. 

To illustrate these intricate systems of lines, it may be said that one 
concern has more than 6,000 miles of gathering and trunk lines and nearly 
100 main and field pumping stations; while another reports a system of 
such magnitude that it drains the crude oil from some 10,000 wells and 


54 OILDOM: ITS TREASURES AND TRAGEDIES 


delivers it to almost any refining center in the United States, save the 
Pacific coast where there are other systems no less modern than those in 
the East, the Middle West and Southwest. 

These lines are known as “gathering” lines and “trunk” lines, the 

pipes of the former being of 6 inches diameter or less, while the trunk 
lines are of 6, 8, 12, and sometimes 16 inches. These very large pipes, 
however, are confined to short distances because they necessitate more than 
an ordinary number of pumping stations, which as a rule are found 
about every 35 miles along the trunk lines, depending upon the hindrance 
or the assistance offered by gravity.* In California the average interval 
is about 12 miles because of the viscosity of the oil and the need of heating 
to make it flow freely. The storage capacity of an 8-inch line is 328 
barrels per mile. Its daily capacity under a pressure of 800 pounds per 
square inch is 21,000 barrels of oil having a gravity of 38 degrees Baumé. 
To transmit so much in a day the liquid must move 64 miles. About 
20,000,000 barrels of oil is generally present in the pipe lines east of the 
Rockies. : 
On July 31, 1923, there was stored the enormous quantity of 293,- 
000,000 barrels of crude oil in the tank farms and pipe lines of the United 
States. This included also the refinery stocks of imported oil and the 
California producers’ stocks on the leases; and compared with 121,700,000 
barrels of crude oil held in similar storage at the close of 1918. 

The Refining of Petroleum.j The crude oil having been pumped from 
the wells and then transported by pipe line, in tank cars, or in tank 
steamers to the refinery, it remains to be seen how its various component 
parts are boken up and separated successively one from another to meet 
the public needs. This is made possible from the fact that the boiling points 
of the different ‘‘fractions”’ or “‘cuts” constituting the crude oil are reached 
at different temperatures. For instance, the naphtha or gasoline in the 
petroleum begins to boil at a lower temperature than does any other 
constituent part. It is therefore the first element to vaporize, and at a 
given temperature the vapor as it passes overhead to the condenser 
will be composed largely of this fraction, though it will contain also more 
or less of the heavier oils. The separation of the fractions is aided by the 
condensing process, since the vapors containing the fractions. of higher 
boiling points are the first to condense. : 

If the temperature in the still is increased, the kerosene begins to 
boil, and this is followed in turn, as the temperature rises, by the gas and 
fuel oils and then the lubricating oil, the last often referred to as the 
paraffin distillate. The time required to produce the four major fractions 
varies from 48 to 72 hours. | 


_ “Wages and Hours of Labor in Petroleum Industr 
Wastiecee fo y, Department of Labor, 
The description of the manufacturing division -of the oil industry has also 
been taken from “Wages and Hours of Labor in the Petroleum Industes! issued by 
the Department of Labor. The process of refining often begins at the well, because 
crude oil usually is contaminated with water and may carry in suspension fine 
particles of sand which must be separated before transporting, unless there is less 
than 2 per cent of these two. The sand and water are commonly designated as 
bottom settlings or “B. S.”’ See article on “Petroleum Refining,” by C. K. Francis 
in Lefaxv, Philadelphia, February, 1922; pages 56-64, ‘“‘Waverly Handbook,’’ Waverly 
peel ts ee Cau St., Pittsburgh ; p. 32, Oil Trade Journal, July, 1923, 350 Madison 
.. Ne rk. 


ft According to Pogue the refining of petroleum is a manufacturing enterpri 
involving the principles of chemical control and multiple production. & rprise 


OILDOM: ITS TREASURES AND TRAGEDIES 55 


The boiling process usually takes places in an immense horizontal 
cylindrical “still”? mounted over a furnace, the fuel being coal or oil. 
The latter is very generally used in California because of the scarcity and 
cost of coal. These stills are of varying capacities, some being as large 
as 16 feet in diameter and 32 feet in length, or 14 feet in diameter and 42 
feet in length, capable of distilling 1,000 to 1,200 barrels at one time; 
while others are very small in comparison, having a capacity as low as 200 
barrels. They are arranged in rows or batteries, a battery frequently 
consisting of a dozen stills. 


AT LEFT, A PRIMITIVE PETROLEUM: 
STILL IN CALIFORNIA 


BELOW, A MODERN REFINERY. 


This battery of 20 crude-oil stills has 
a capacity of 10,000 to 25,000 barrels 
a day. The Standard Oil Refinery at 
Bayonne, N. J., can handle 100,000 bar- 
rels a day. 


—U. S. Geol. Survey. 


—Bureau of Mines. 


The condensing equipment consists of a coil or system of parallel 
iron pipes, usually submerged in a large tank of cold water. As the 
vaporized oil from the still is conveyed through the pipes and comes in 
contact with the cooling surface it is condensed into a liquid form and is 
run to the receiving house, the four major fractions being diverted into 
separate tanks as each is distilled in turn by increased heat. The con- 
densers vary in size with the sills, some of the boxes measuring as much 
as 20 feet in width, 48 feet in length, and 12 feet in height. 


56 OILDOM: ITS TREASURES AND TRAGEDIES 


In addition to the cylindrical still there is the “‘cheesebox”’ still which 
is little used nowadays. The “steam still’? obtains its name from the fact 
that the distillation is effected by steam instead of by fire. The “‘tower still’’ 
is so called because of the condensing and separating tower which rises 
somewhat higher than the still itself. The ‘continuous still’”’ is one in which 
the distillation is a continuous process, making it possible to obtain at the 
same time different fractions from the several stills in the battery. This 
is done by connecting all the stills of a battery, the temperature being in- 
creased at each successive still. The crude oil is charged into the initial 
still which takes off the naphtha, and flowing from that to the others, each 
distills its fraction; the residuum is pumped from the last still. The “‘vac- 
uum still,” smaller than the average crude still, is so called because a par- 
tial vacuum is created in it by the use of a pump, and this causes some of 
the fractions to vaporize at temperatures lower than would be the case 
under atmospheric pressure. ‘Pressure stills’? are those in which the dis- 
tillation is carried on by subjecting the oil to heat and pressure to increase 
the recovery of gasoline from the crude. 


1. To return to the four major fractions resulting from the distill- 
ation of the crude oil, it is found that the naphtha is not of sufficient purity 
to make it marketable, so it is pumped into a huge tank-like container 
called an “agitator,” in which it is agitated with air or circulated through 
a centrifugal pump, treated with sulphuric acid and caustic soda, then 
washed with water, causing the “sludge” or sediment to settle at the 
bottom so that it may be drawn off. This sludge contains some oil and tar, 
the former being recovered, the latter being used as fuel. The chemical 
treatment of the naphtha, not only removes the sulphur and impurities but 
also improves the odor and color of the product. This process sometimes 
takes place in a continuous heating plant, so called because the oil and acid 
are fed continuously through a mixing device. The time required for treat- 
ing the oil in an agitator of 5,000 barrels’ capacity is about 30 hours. Fol- 
lowing the chemical treatment the naphtha is subjected to a second dis- 
tillation in a steam still. Steam is used not only because naphtha boils at 
such a low temperature that the use of fire is not required but also because 
the product from the second distillation is believed to be of a better qual- 
ity if steam is used. (Naphtha is here used synonymously with gasoline.) 

2. The kerosene, which was found to be the second fraction obtained 
from the distillation of the crude oil, is also given a chemical treatment, 
after which it is redistilled in a combination fire and steam still, the fire 
causing the necessary heat and the steam preventing “cracking,” that is 
the disintegration of the oil. Even after this process it is sometimes again 
rerun in a steam still or filtered through clay to further improve its quality. 

38. The gas and fuel-oil stock, the third fraction to come over in the 
distillation of the crude oil, is not usually given further treatment. Gas 
oil is used principally in the manufacturing of city gas. The varied uses 
of fuel oil are enumerated in Chapter VI. 

4, The lubricating-oil distillate or paraffin distillate, the fourth frac- 
tion resulting from the distillation, contain the stock from which both 
lubricating oils and paraffin wax are obtained. It is pumped from the re- 
ceiving house to the tanks of the paraffin department, then through the 
chillers to the presses. The chilling process, which is performed in a 


OILDOM: ITS TREASURES AND TRAGEDIES 57 


large refrigerating plant, crystallizes the wax in the oil, forming a kind of 
slush which is then by means of presses filtered through canvas blankets, 
the oil passing through and dripping into a tank where the “slack wax” 
adheres to the blankets. 

The pressed oil, now wax free, is pumped from the tank to the “reduc- 
ing stills’”’ where it is reduced to the required viscosity for lubricating oils. 
This is accomplished by distilling off some of the lighter fractions. The 
lubricating oil remaining is then pumped to the agitators and there treated 
with sulphuric acid and caustic soda in order to improve the color and odor 
and to remove heavy carbon.* 

The “slack wax” as it is scraped from the blanket falls into a worm 
conveyor, which carries it to the melting tank. After melting it is pumped 
to a settling tank and from there to the paraffin agitators, where it is 
cleansed with a treatment of sulphuric acid and caustic soda to improve the 
color. In order to remove the remaining oil, the melted wax is pumped 
into “sweating pans” and allowed to cool and solidify. The pans are then 
gradually warmed up, which causes the oil in the crystals of wax to sweat 
out and flow to the receiving pans, and this oil is then resweated to re- 
move any wax remaining therein. The wax obtained by the “sweating 
process” is known as “trade scale wax’? which may be resweated to re- 
fined wax, the latter being filtered through Fuller’s earth or animal char- 
coal to make the product colorless. The filtered refined wax is then run 
through press molds and made into cakes.} 


PETROLEUM PRODUCTS. 


As a result of chemical technology applied to the refining of petrol- 
eum, more than 300 distinct products? have been obtained. But the 
possibilities seem almost boundless for increasing this number with the 
progress of science.|| In this respect, mineral oil is comparable with coal. 


*The “sludge,” which is a term used to cover dirt and other impurities, settles 

in the bottom of the agitator and is then pumped to the acid plant, where it is 
charged into a kettle of water and blown with steam. This treatment, or cooking, 
separates the oil, acid, and impurities, the last’ being known as acid coke. The oil 
‘and acid are pumped off and the coke is dumped into a conveyer for transfer to fuel 
cars. 

7 The above description applies when paraffin base crude oil is used, and this 
oil predominates to a greater extent in the Appalachian field than elsewhere in the 
United States. In addition to this, there is a greater demand in the East for 
lubricants, the result being that most of the refineries having a paraffin department 
are located in the Hast. In the refining of other crude petroleums, however, the 
method is very much the same, excepting that a less number of finished products 
are obtained, the residue depending upon the oil that is used. Much of the crude 
oil produced in Mexico and also in California is of the asphalt base, which yields 
gasoline, kerosene, fuel oil, and asphalt. 

¢ About 125 of these are listed in an excellent chart of ‘Principal Commercial 
Products of Petroleum—Their Sources and Uses’, published by the Standard Oil Cv. 
(N. J.), 26 Broadway, New York. N. E. Loomis, of this company, is the author of 
a popular booklet, “Refining of Crude Petroleum.” 

|| Refiners are all familiar with the customary means for either increasing (by 
polymerization) or decreasing (by cracking) the average size of the hydrocarbon mole- 
cules. Cracking processes also tend, to a limited extent, to convert one type of 
hydrocarbons (e. g. paraffine) into another (e. g. aromatic compounds). If petroleum 
hydrocarbons are to be raised to a different price level, it is practically necessary to 
insert a new chemical element into the molecule. Oxygen, sulphur, nitrogen, and 
chlorine have been seriously considered for this purpose. “Science’s Future with 
Oil”, by Arthur D. Little and R. BH. Wilson, in Petroleum Age, November 15;21921, 


58 OILDOM: ITS TREASURES AND TRAGEDIES 


9 RE KR 


Ss 
5 es 
aS 
SS 


ey Courtesy of Union Of Company. 


ABOUT 800 PRODUCTS COME FROM CRUDE OIL 
For their varied uses see pages 59 and 94 
—Courtesy of Union Oil Co. of Calif. 


OILDOM: ITS TREASURES AND TRAGEDIES 59 


The highest prized by-product of coal is no doubt aniline dye; the most 
treasured petroleum product today should be the undervalued though 
limited lubricating oil, so essential for the machinery of industry and yet 
so tragically burned beneath boilers. 

Actually, at present, gasoline is the most generally appreciated 
product; it must not be forgotten what an important part it played in win- 
ning the war by supplying the power for rapid transport by air, sea and 
land. Further, gasoline from certain oils, as from Borneo, together with 
synthetic gasolines, contains organic compounds from which the now 
famous explosive TNT (trinitrotoluene) has been made. Some of our 
California crudes can be used commercially to produce this death-dealing 
substance since technical examination has proved their content of suitable 
aromatic bases. 

The future holds forth an astonishing probability of deriving from 
petroleum a substance much more essential than any gotten out of coal. 
For years scientists have puzzled their brains to procure edible fats from 
the mineral kingdom. The close relation between the higher boiling frac- 
tions of petroleum and the fatty acids drew their attention in the direction 
of mineral oils. This relation was very obvious in regard to the burning 
and lubricating powers of the two. Comparing paraffin with fatty acids 
’tis found that the carbon:hydrogen ratio is about the same—a little more 
than 6:1; but the latter contains 11 per cent of oxygen which is entirely 
absent from the paraffin. As a result of the diminishing fat supply in 
Germany during the war her chemists worked frantically on this problem. 
It is reported that they really succeeded in obtaining fatty acids from 
paraffin and also in converting these into a carbohydrate food with the 
help of glycol, a substitute for the related glycerine and itself a petroleum 
derivative.* 

From the moment of announcing that such a super-treasure—substan- 
tial food for humans—has emanated from the inorganic empire on a com- 
mercial scale, there will be gotten under way stock companies galore. They 
will proceed to advertise their ability to manufacture food out of atmos- 
pheric oxygen plus a little “sweet”? petroleum. Investors, then beware! 

The consuming public is familiar with only a few products manufac- 
tured in quantity out of crude oil, for many of the substances which are 
known under trade names are not readily recognized as petroleum deriva- 
tives. In the following chapter will be indicated the very wide range in 
the present utilization of petroleum and its products, which furnishes one 
basis for their classification from the economic standpoint. Commercially 
there are known: I. The Major Products—1. Gasoline, 2. Kerosene, 3. 
Fuel (and Gas) Oil, and 4. Lubricating Oil; II. The By-Products—1. 
Asphalt, 2. Paraffine Wax, 38. Coke, 4. Grease, 5. Petrolatum; besides 
the many secondary and tertiary derivatives.} 


*“Hdible Fats from Mineral Oils’, by H. T. Stowell in Lefag, Philadelphia, July 
1921, p. 68. 

7See Technical Paper 323, “Specifications for Petroleum Products and Methods 
for Testing”, Bureau of Mines, H. Foster Bain, Director, Washington, 1923, from which 
the following “Distillation range’ for Motor gasoline has been taken: When the first 
drop of liquid is condensed the temperature shall not be above 131°F. When 20 per 
cent has been received it shall not exceed 2210F.; when 50 per cent, 2840F.; when 90 
per cent, 392°F.; and the end point shall not be above 4870F. At least 95 per cent 
shall be recovered as distillate from the distillation. 


60 OILDOM: ITS TREASURES AND TRAGEDIES 


From the refinery standpoint the products may be roughly resolved 
into six great groups, beginning with that having the lowest temperature 
of vaporization: 1. Liquified Gases, 2. Light Distillates (gasoline, naph- 
tha, benzine, kerosene), 3. Heavy Distillates (light, fuel, stove and Diesel 
oils—all raw materials for the cracking process to yield synthetic gaso- 
line), 4. Lubricating Oils, 5. (Heavy) Fuel Oils (residual), and 6. As-. 
phalt or Paraffin (residual). 

While the products of the different refineries vary in number, nature, 
grade and utilization, efforts are being made to standardize them, par- 
ticularly those consumed by our Federal government.{ There is, however, 
a tendency on the part of gasoline producers to lift the end point of dis- 
tillation so as to get a greater recovery from the crude oil, particularly 
during the season of maximum demand, by encroaching on the naphtha and 
kerosene content thereof, these having a higher boiling point than straight 
gasoline. For motor use in cold weather, this encroachment may be 
neutralized by the refiner blending such heavy gasoline with as much as 
15 per cent of natural gas (casing-head) gasoline. This permits an in- 
creased recovery of refinery gasoline amounting to 6 per cent of the 
original crude or 380 per cent of the usual yield of eee assuming a 
crude oil that is naturally only one-fifth gasoline. 

By the cracking process, the gasoline recovery may be doubled. On 
the other hand, there is an actual loss of material and a loss because of 
manufacturing cost; yet the resulting gasoline gives up hardly half the 
power in the modern automotive engine that the original heavy (fuel) oil 
would give in the Diesel type of engine.* 

In 1910 the average yield of gasoline from crude oil was 11 per cent, 
while in 1919 this average had risen to about 26 per cent without impair- 
ing the quality of the product. This record indicates what efficiency is 
doing for the oil business, and in time to come still greater results and 
greater still results will develop. The oil technologist is a Progressive and 
a “cracking”’ good fellow.+ 

The figures in the table below may be taken to represent either the 
percentage of recovery or the actual number of gallons of the primary 
products gotten out of 100 gallons of the average crude oil run through all 
the reporting refineries of the United States during the first quarter of 
1923, based on Bureau of Mines data. 


Gascandeh nels Wsseae. =e eee 47 Lubricating Ol.2 == aa ee 4.3 
Gasolin Gps 2 pera ere eee tee 30 Wax, Asphalt and Waste-_________ 9.5 
FKOVOSCING cna eee = es Se er ee ey 9.2 — 

Total o2222 5-2 225 eee 100.0 


*The Mining Congress Journal, November, 1920, p. 586. 
;Editorial in The Oil and Gas Journal, Tulsa, Okla., October 29, 1920, p. 3. 


CHAPTER V. ECONOMIC ASPECTS OF THE DOMESTIC 


INDUSTRY. 
“All the troubles of the world are economic in nature, and hard work is the only 
cure for them.’’—Don Gelasio Caetani, Mining Engineer and Ambassador from Italy, 


in Mining and Metallurgy. 
“Had John D. Rockefeller been merely a hoarder and lender of money, the country 


might yet be paying many times the present prices for lubricants and illuminants, and 
the ‘Oil King’ might have been a very common-place business man instead of a financial 


colossus.’ AE L. Barber. 


General. 


Importance. The economic importance of petroleum has not been 
overestimated. The interpenetration of agriculture and nearly all other 
industries by petroleum, the extraordinary significance which oil has for 
the merchant marine and navies, and the untiring zeal of the research 
chemist contribute to make of petroleum and its supply an ever enlarging 
economic question.* The American public has become accustomed to the 
daily use of products from mineral oil without giving much thought to 
what the natural substance looks like, where it is produced, why the supply 
is so limited compared with coal, and how and by whom the prices of the 
raw and the refined material are determined. Of our population it is said 
that 60 millions, or more than half of the total, are interested directly or 
indirectly in petroleum—from the consuming rather than the earning end 
and yet, how few—certainly less than one per cent of them—are familiar 
with the most interesting economic facts of either basic or current impor- 
tance pertaining to mineral oil! 

Comparative Magnitude. Allowing 6 barrels to the short ton, the 
550 million barrels of crude oil delivered by the 275,000 producing 
wells in 1922 weighed approximately 90 million tons. This quantity 
equaled the tonnage of the anthracite or nine-sevenths that of the iron 
ore mined normally in the United States during recent years. All our agri- 
cultural exports for 1921 and 1922 averaged in weight but one-fifth as much. 
It must be surprising to many that a 3-billion bushel crop of corn and a 
12-million-bale cotton crop together make but five-sixths of the mass 
of the oil output in 1922. George Otis Smith, Director of the Geological 
Survey, compared the 1918 flow of oil in volume with the summer flow of 
water in the “Niagara of the South’”’.+ He allowed 4% days’ flow to equal 
the 413 million barrels produced. At this rate 6 days would be required 
to gauge the yield of petroleum in 1922, and practically 8 days to gauge 
that of 1923. : 

Production Per Man. Out of a total of 125,110 (average number) 
wage earners engaged in the oil and gas industry during 1919, only 93,122 
were employed in the production of the crude material. In this respect it 
was inferior to the anthracite industry of Pennsylvania which required 
nearly 70 per cent more wage earners. But this really reflects credit on 
the collective petroleum and natural gas industry since it points to a much 
higher output per worker, even compared with the entire coal industry, as 


*U. S. Commerce Reports, Oct. 24, 1921. 
{ National Geographic Magazine, Februiry, 1920. 


(61) 


OLDEST DRILLED OIL WELL IN THE UNITED STATES’ 
Drake’s discovery well—‘‘The Shrine of Petroleum” 


COTTON PLANTATION AROUND LULING, NEW TEXAS FIELD 


BURKBURNETT OF TOWNSITE FAME, WICHITA CO., TEX. 


OILDOM: ITS TREASURES AND TRAGEDIES 63 


shown in the following table for the census year 1919 and, unlike the auto- 
motive industry, the oil and gas industry deserves praise for not noticeably 
diverting labor from farm lands into oil fields (and refineries). 


Number 

of Wage 
Earners Total in Millions Output per W. Earner 
Industry Quantity Value Quantity Value 
Oli foun G AS. oe 93,122 378.4 bbls. $931.8 4,060 bbls. $10,030 
ANTHRACITE alone___-~ 154,571 88.1 s. tons 4365.0 570 s. tons 2,360 
COAL (Anthr. & Bitum.)_~ 776,569 554.0 s.tons 1,525.5 713 s. tons 1,965 


The values for oil and gas include $155,900,000 for 961 billion cubic feet of 
natural gas and $78,800,000 for 454 million gallons of natural-gas gasoline. 


TABLE TO SHOW THE POSITION OF PETROLEUM IN THE MINERAL 
INDUSTRY, 1922 


(Values expressed in millions according to the U. S. Geol. Survey) 


Bituminous coal $1,294 Nat.-gas gasoline $67 Copper $127 
Anthracite 274 +#Pig iron 608 Stone 119 
Total coal 1,568 Clay products 270 Sand and gravel 61 
Petroleum 900 Cement 208 Silver 56 
Natural gas 196 Iron ore 158 Lead 52 


During the past three or four years the value of crude oil alone has 
been annually making up 19.5 per cent of the total for all the mineral 
products; oil, gas and natural-gas gasoline together from 23 to a little 
over 25 per cent (in 1922). 


HISTORY AND GROWTH. 


Colonel Drake’s Discovery. Despite the fact that these valuable hydro- 
carbons (oil and gas) had been known to the human race for over twenty- 
five centuries, it remained for an American, Colonel E. L. Drake,* of the 
Seneca Oil Company, to become the real founder of the petroleum industry, 
when, on August 28, 1859, he completed the famous well in Venango 
County, near Titusville, Pennsylvania. This notable event occurred when 
“rock oil” was selling for $25 to $30 a barrel and soon led to a drilling 
campaign of wide extent, spreading to Ohio, West Virginia and Canada in 
1860. In 1862 the pioneering was carried to Russia where hand digging 
was done till 1869, when it was supplanted by drilling, resulting in a rise 
there from 37,400 barrels yield in 1863 to 203,000 barrels in 1869. (See 
Chapter IX.) 

A Nomadic Industry Yet Unlike Gold Mining. Due to the prevailing 
presence of mineral oil in the less disturbed strata, the drilling of oil wells 
follows oftener in the wake than in the lead of land development for 
farming and the establishment of municipalities; whereas the reverse 
has been true of the mining industry in general, particularly in regard 
to the gold, silver and copper centers of the western or more mountainous 
areas of our country. And yet there are places where the oil derricks have 


*A magnificent residence in Titusville houses the Drake Memorial Museum. This 
structure was formerly the home of John C. Bryan, D. H. Cady, John D. Archbold and 
Colonel J. J. Carter, all noted men in the oil industry in their day. 


64 OILDOM: ITS TREASURES AND TRAGEDIES 


been reared in deserts and in rock lands unsettled or unfit for other 
purposes and have thus brought pioneers into play. During the last 
decade the tendency has been for the forests of derricks to spring up 
almost overnight among the orchards in California, the cornfields in Kan- 


On some desolate hill in the desert, 
On arid untillable soil, 
A derrick appears and the brave pioneers 
Start a bit down in search of the oil. 
—CHARLES C. WRIGHT. 


THE DISCOVERY WELL IN THE WHEELER RIDGE DISTRICT, SOUTHERN 
CALIFORNIA, 1923. 


Completed at 2,130 ft.; initial daily yield, 270 bbls. of 25.5° gravity oil. 
— Standard Oil Bulletin, Aug., 19238. 


sas, the cotton plantations in Texas, Louisiana and Arkansas, and the house 
tops of such townsites as Burkburnett and Long Beach. 

First Epoch, 1862-1882. This period was characterized by mechani- 
cal inventions in the production and transportation of petroleum. Methods 
for deep drilling were perfected, and the fields of Pennsylvania especially 
exploited. Transportation through pipe lines and tank cars was intro- 
duced, refining methods were extended and improved, and very large gas 
wells were discovered in drilling for oil. It was near the close of this 
period, in 1882, that the Standard Oil Trust was formed, and it became 
the chief agent in promoting a world-wide market for American petroleum 
and its many refinery products. 

The Second Epoch, 1883-1902, marked the rise of the natural gas in- 
dustry and the bringing of gaseous fuel into domestic use throughout the 
oil fields. Its use in the manufacturing industry became greatly extended. 
Thus in 1883 two iron companies piped gas from a well in Butler County, 
Pennsylvania, to their iron works on the Allegheny River. They found 
the natural pressure sufficed to force a supply through to their factories 
enough for their fuel needs in smelting billets and finishing various 
products. This successful experiment led to a vast extension of pipe lines, 
and the natural gas industry was born. Capital intelligently guided in the 
form of a Standard Oil subsidiary sought the advice of Professor I. C. 
White, who, in June, 1882, had rediscovered the forgotten ‘Anticlinal 


OILDOM: ITS TREASURES AND TRAGEDIES 65 


Theory” of earlier geologists. Practically no progress had been made 
previously in finding oil outside of Pennsylvania, southern New York, 
southeastern Ohio, and the Volcanic arch of West Virginia, because there 
was no consistent theory to guide the drill in its search for the hidden 
treasures of oil and gas. But with the announcement of this structural 
theory the development of oil and gas spread across West Virginia into 
Kentucky, and passed from Ohio into Indiana on its westward march. 


The Third Twenty-Year Epoch closed with 1922, was distinguished 
tor its large production and utilization. of gasoline, accomplished mainly 
through the invention of the internal combustion engine, and for the gen- 
eral introduction of liquid fuel where available for locomotive, steamship 
and other industrial purposes. The Diesel engine advanced the efficiency 


THE DEAN OF AMERICAN 
PETROLEUM GEOLOGISTS 


State Geologist Israel C. White of West 
Virginia, who rounded out three-fourths of 
a century Noy. 1, 1928. He has done much 
for the conservation of our fuel resources, 
and the development of the Mexican oil 
industry by Americans. 

He has been a member of the Federal 
Trade Commission. As an economic geolo- 
gist and historian he has .divided the eco- 
nomic history of the American petroleum 
industry into three parts. 


in the utilization of heavy liquid fuels as compared with their burning 
beneath boilers. The automobile and the aeroplane are only two of the 
inventions made practical through gasoline and the combustion engine. 
Meanwhile the structural theory of oil occurrence has led to a world-wide 
development of oil fields in many of our States, Latin-America, and num- 
erous lands of the old world. 


TABLE TO SHOW ABSOLUTE GROWTH IN YIELD AND VALUE OF 
CRUDE OIL EXPRESSED IN MILLIONS OF BARRELS AND 
MILLIONS OF DOLLARS. 


Year Quantity Value Year Quantity Value 
13660025 i ae 5 4.8 TE as oe wh ene A mle 222.9 164.2 
1Sshie | ACs oe 2.5 16.5 titi eee yh 248.4 237.1 
Tig Oetn ees he ie 5.3 20.5 Se Coen ae ee ee ae 265.8 214.1 
Dg t,t eee 8.8 7.4 ji 1 OS i es yh ee 179.5 
(ie eae 26.3 24.6 AUT cl Ee AN he . 800.8 330.9 
Lie te es 21.9 19.2 POUT Sree te Fee 335.3 522.6 
ost None wera eee 45.8 35.4 Eth SS Cale. See i 355.9 703.9 
ieee ees t.  BDG 57.6 ob ek eae Bagot nS Sapir tey 378.4 759.9 
NOT lak" ea 63.6 76.0 TUCO see Me ee 443.0 1,360.7 
a7: Sin BB lie dg a 134.7 34.2 TORQ we eee 472.9 153.3 
Obed ee 209.6 127.9 hip! -») ple er AA Ae Sa 551.2 - 900.2 


i 220.4 134.0 pS! 4 PREC OS oe Oe oe 735.0 950. ? 


66 OILDOM: ITS TREASURES AND TRAGEDIES 


Only 2,000 barrels worth $32,000 were produced in 1859, the first and 
fractional year of the American petroleum industry. The first year in 
which crude oil reached and passed the 100 million mark in quantity was 
1903, and in value, 1904. It has taken fourteen years (1909-1923) to 
quadruple the quantity produced in one year; ten years to treble it, and 
only four years (1919-1923) to double it. In 1922 the yield was almost 
ten times what it was in 1898, and in 1923 more than ten times what it 


was in 1901. 


COMPARATIVE GROWTH OF THE PETROLEUM INDUSTRY FROM 
1913 TO 1923. 


Per 

1913 1923 Increase Cent 

Population-—-mllvous + seneeee oes ees 96.5 110.0 13.5 14 
Farm Products, billion dollars______----~- 10.0 15.0 5.0 50 
National Income—billion dollars________ 34.0 50.0 £16 47 
Domestic Exports—billion dollars_______- 2.4 3.8 1.4 58 
National Wealth—billion dollars_________ 188.0 300. 412. 60 
Savings Deposits—billion dollars________-_ 8.4 VES 8.9 105 
National Bank Deposits—billion dollars__ 6.0 Oi a leier 228 
PETROLEUM—Hnillion barrels___________ 248. 735. 500. 200 
PETROLEUM—nmillion dollars_________~ 237. 950. ley 300 


PROBLEMS AND PRELIMINARIES | 


Problems Demanding Early Attention.* In order to aid in the 
restoration of agricultural prosperity and in the maintenance of American 
prosperity in general, practical solutions of certain petroleum problems, 
all more or less economic in nature, cannot be deferred from year to year 
without disastrous consequences. Sixty millions are in the grandstands 
impatiently awaiting proper team work on the part of the players. The 
operators in the oil industry are the players, the two teams are the Stand- 
ard group and the Independents, and the umpire is Congress holding the 
cudgel of nationalization to be used if the game is not played fairly and 
squarely. The questions that perplex us are listed herewith in the order 
of their evident urgency: (1), prevention of waste after winning both 
the crude and the refined products; (2), highest possible degree of extrac- 
tion and utilization of products according to some priority rule that will 
recognize the lubricating element as the most essential; (3), conservation 
in the more complete recovery of both oil and gas resources still held in 
Nature’s storehouse; (4), prevention of over-production—a result of in- 
tensive or townsite development—by legal restriction like that now tardily 
enforced in California; (5), stabilization of prices which in part should re- 
sult:from a realization of (4), (6) and (7); (6), standardization of both 
the facilities and the finished products, fixing seasonal and othér permis- 
sible ranges in quality; (7), acquisition and development of foreign petro- 
leum reserves. 

The public should be vitally interested in these problems. Only 200,000 
persons at the most, as investors in exporting companies, are directly 
concerned in the upkeep of our immense foreign trade in petroleum pro- 
ducts. However, the stabilizing influence of a large foreign market on 


*See the Scientific American, February and August, 1922. Practically every 
recent issue relates in part to mineral oil. 


OILDOM: ITS TREASURES AND TRAGEDIES 67 


domestic prices must indirectly affect all of the consuming American 
public. The questions of multiplying, chemically, the already great num- 
‘ber of products, and, commercially, their manifold uses, are of special 
significance to the refiners and marketers who thereby may obtain increased 
financial returns from a given quantity of crude. 

Since the above was written there appeared in The Oil and Gas Journal 
of October 11, 1923, an article by N. O. Fanning in which he considers six 
chief problems facing the oil industry: (1) Necessity of controlling crude 
oil production—to keep it close to current needs; (2), need of locating re- 
fineries where profitable to operators; (3), supplying various products 
proportional to demand; (4), adjusting freights with reference to rela- 
tionship between land and water transport; (5), perfecting statistics of 


Oil Industry’s Remarkable Expansion 
Within Thirty-Year Period 


~W—— — — — — on 
et -— 


output, consumption and movement of crude and refined oils, and (6), defin- 
ing a national policy for the petroleum industry. 

None of these problems can be discussed at length in this limited space; 
but a few of the more important ones will be dealt with in describing the 
major economic functions of the oil industry—production, transportation, 
refining and distribution. 


Exploration and Development.* Some practical economics of explora- 
tion have already been pointed out, particularly in regard to the employ- 
ment of geologists and core drills. The proving of reserve deposits without 
actual productive development must have a strong stabilizing effect both 
on prices of crude oil and the market value of the securities of the fortu- 
nate owners of such reserves. Necessarily, development starts ahead of 
production, but not before exploration, and rarely continues after any of 
the oldest wells on a given property or structure have gone dry. The 
slower the development or the fewer the wells or outlets, the longer the 
producing life of a pool or any particular property; but the ultimate yield 
of a limited part of a pool may be lessened if adjacent and competing prop- 
erties are drilled up more promptly, this due to the elusive nature of 


*Based in part on McLaughlin’s ‘Oil Land Development and Valuation”, McGraw- 
Hill Book Co., 370 7th Ave., New York; and Commerce Monthly, February, 1922, 
National Bank of Commerce, New York. 


68 OILDOM: ITS TREASURES AND TRAGEDIES 


petroleum as a liquid. Where capital is limited, the rate of development 
may prove very slow, particularly if it takes months or even a year to 
drill one well. Large operators take advantage of ‘high prices by adopting 
an intensive drilling program so as to market their flush production as fast 
as facilities permit. This has the added advantage of quicker return of 
invested capital and gives a greater present worth to a property. Another 
inducement for prompt development lies in the lowered unit cost of operat- 
ing many wells by one owner. Depression in the petroleum industry, how- 
ever, limits to some extent the drilling of wells in known fields, and to an 
even greater degree the exploration of new territory. 

Well Spacing, Drilling Methods and Economic Guidance. A distance 
of 440 feet between wells, or 4.45 acres per well, seems to be common in 
many American fields where production is not deeper than 1,000 feet. Such 
arbitrary spacing may be increased up to 660 feet (10 acres per well) in 
3,000 feet territory where the beds are but slightly disturbed. These rules 
for spacing wells may be useful until bettered by observation.* It is of 
the utmost economic importance that the most suitable system of drilling 
be used, core, cable, or rotary, according to the kind of formation and the 
previous knowledge of the number and depths of oil and water sands.f Vic- 
tor Ziegler, in “Popular Oil Geology,” emphasizes the fact that the economic 
may be more important than the geologic considerations in deciding whether 
or not to drill a particular structure. Weighing the economic information 
may make inadvisable the development of an area otherwise favorable. Those 
using the nicest of judgment in balancing the two sets of: considerations 
against each other achieve the greatest success in the petroleum industry. 
The economic facts may be grouped under the following headings: (1) 
Depth of drilling; (2), possible value of production; (8), accessibility; 
(4), transportation facilities; (5), operating requirements, and (6) legal 
status of lands. (For costs of drilling see Chapter XII.) 


PRODUCTION OF CRUDE OIL 


Production Problems. ‘‘The most important problem affecting the pro- 
ducing of petroleum is that of conservation—to obtain a greater percentage 
of the oil actually contained in the ground than is permissible by the 
methods most commonly employed.”t Practiced and proposed methods of 
increasing recovery are mentioned in Chapter IV and later in this Chapter. 
Hitherto, applications thereof have been made only in the older fields. The 
extra expense has not generally encouraged the extension of these con- 
servation methods, particularly when so much of the total production 
(half of 2.2 million barrels daily.during September, 1923) was coming 


*These rules are badly broken in the rush of over-development, as in the cases 
of competitive townsite drilling at Burkburnett and Long Beach. Development is — 
accordingly classified as normal or rational and as uneconomic or competitive. 

+According to J. Edgar Pew, V. P., Sun Oil Co., the methods of drilling and 
operating oil wells have changed but little in 30 years, the chief exception being the 
application of the rotary process to the softer formations. Probably no other in- 
dustry needing enormous and ever-increasing investments, would have allowed itself 
to keep on using original methods and without any marked improvements therein 
as applied to the operations as a whole. Because they are so numerous and their 
work so scattered, the average producers have the habit of taking the methods and 
material handed down whether best suited to their needs or not. 

+U. S. Department of Commerce, Petroleum Division, Henry C. Morris, Chief. 


OILDOM: ITS TREASURES AND TRAGEDIES 69 


from seven huge fields in or near the flush of their lives. The ratio between 
flush and settled production varies from year to year, being about 1 to 3 
for all the major fields in 1919 and 1 to 4 in 1920, according to R. D. Ben- 
son, who estimated that 21 per cent of the entire yield of the United States 
in the latter year came from wells less than a year old. Local fields 
having comparatively thin sands and limited areas may reach peak within a 
year and settled production within 15 to 20 months after the discovery 
well has been brought in, provided that the wells are not over 3,000 feet 
deep and development proceeds at a rapid rate, as in the case of Corsicana- 
Powell. Sometimes the flush period of a newly discovered field or pool cul- 
minates quickly; but if the development drags along, a large yield may 
be maintained for two or three years without the sudden slump to settled 
or pumping production that characterizes most American pools and wells 
north of the Rio Grande. 

Peak Production and Economic Limit. Sante Fe Springs in the Los 
Angeles basin is an example of the type of pool where the oil comes from 
an exceptionally thick “‘sand”’ or horizon capable of sustaining an immense 
output for years if the pool were only entirely exempt from townsite de- 
velopment. Were it not for such over-development in part the peak would 
not have been pushed up quite so high,—to practically 350,000 barrels 
daily for a short time in August, 1923, compared with 300,000 for a day 
or two in April, 1915, in the case of Cushing, Okla. Both took two years 
to attain the maximum rate. During the last week of September, 19238, 
the leading California field was still producing at a daily rate close to 
310,000 barrels, while Cushing, now fourth in Oklahoma, had a rate of 25,- 
000 barrels and was very slowly declining. The proven area of Santa Fe 
Springs is not much less than 2.5 square miles, say 1300 acres, while that 
of the Cushing field, including its Dropright, Drumright and other sub- 
divisions, must be at least 10 if not 20 times as large. However, it is 
doubtful if Santa Fe Springs, no matter how large the area from which 
the oil drains into its small structure, will be able to produce 25,000 bar- 
rels daily 11 to 12 years after its discovery. At any rate, because of the 
greater cost of pumping, after these wells cease flowing, the economic limit 
per well looms high. : 


Chiefly due to the temporary depression in the oil industry, the Kevin- 
Sunburst field found early in 1922 near Shelby, Montana, and representing 
a production type quite different from the two described, is enjoying a 
moderate rate of development and a slow approach to peak. Its develop- 
ment and future production may be designated as extensive and not in- 
tensive. Because of its unsurpassed area for a single structure it is bound 
to have a long life although its yield per acre may be relatively low. For- 
tunately for economic development it has fallen into the hands of opera- 
tors who have large holdings and can prevent over-drilling and over-pro- 
duction and procure a high percentage of recovery. Although the gravity 
of the Kevin-Sunburst oil is not quite so good as that of the Cushing field, 
and although the sands are only four-fifths to one-tenth as thick as the 
four productive sands of the latter, the economic limit of production per 
well will no doubt prove less than the seemingly low limit allowed for 
pumping wells in Cushing and most of the other pools or districts within 


70 OILDOM: ITS TREASURES AND TRAGEDIES 


the. Mid-Continent field, namely 75 barrels per year.* There are several 
reasons for this favorable economic situation of the Kevin-Sunburst field: 
(1) Smaller cost of lifting the oil to the surface due mainly to the shal- 
lower depth, hardly two-thirds of the 2500 to 2700 feet depth of the . 
Bartlesville or principal sand in the Cushing field; (2) less return of 
capital through depletion and depreciation since land, leases, and drilling 
are not so expensive; (3) smaller costs for operating, other than pump- 
ing, particularly because a railroad already taps this territory; and (4) 
nearness to markets removed from competing sources of supply. This 
last advantage is more pronounced with reference to Wyoming fields than 
to Cat Creek, the only other Montana field of present importance. For in- 
stance, the Canadian markets in the wheat fields to the north are about 
500 miles nearer Sunburst than Salt Creek (in Wyoming). 


Production Per Acre. Roughly estimated, the ultimate yield per acre 
of producing oil land averages 3,400 barrels, assuming 300,000 wells will 
eventually have discharged 7.1 billion barrels of oil from 2.1 million acres 
on the basis of 7 acres to the well. In this calculation the past production 
of 200,000 exhausted wells from 2 million acres has been disregarded; 
their ultimate yield was likely not less than what the future yield of the 
300,000 live wells alone will be after January 1, 1924. For comparison 
with this approximation of 3,400 barrels per acre—average ultimate yield 
for all the major fields of the United States—there are given below 
specific figures to show the acre output for selected areas. 


PAST YIELD PER ACRE, GULF COAST DOMES TO JANUARY 1, 1921+ 


Dome or Field Acreage Bbls./Acre Dome or Field Acreage Bbls./Acre 


JenninSs'=(as) eee 142 223,395 Batson: Pex; 2223 3 4an - 63,686 
Spindletop (Tex.)____ 265 177,606 Saratoga (Tex.)____ 450 45,641 
West Columbiat_____ 140 134,904 Humble s vosese se 2,225: > 58862 
SOUr bakes so ess 450 130,869 Hills sea ee 974 6,545 
Vinton (ia = ee 140 TE SO Damon Mound___-_ - 358 6,185 
Edgerly (ia,)a23 2225 76 77,194 — 

AVGra Seu a eee 5,697 56,400 


PAST YIELD PER ACRE OF OTHER AREAS TO JANUARY 1, 1921. 


Caddo (La.) (1 property). _ 44,800 Cushing: (Okla) 22.23 eee 11,000 
Kern River (Cal.) 6,982 a.-__— 82,300 Glenn “Pool (Okla) 2.22 7,500 
Healdton (Okla.) (1 property)__ 29,450 Bartlesville (Okla:)— 22222 ee 1,800 


Operators in the high-grade Tonkawa filed in Kay and Nobles coun- 
ties, Oklahoma, believe that the South pool thereof will ultimately yield 
30,000 to 35,006 barrels per acre. Col. A. E. Humphreys, of Mexia and 
Powell fame, quotes F. Julius Fohs as authority for an estimate of 600 
million barrels total future production of the Los Angeles basin. Includ- 


*Part of this data derived from “The Sunburst Oil Field of Montana’’, a paper 
prepared by Dorsey Hager for the American Inst. of Min. and Met. Hngineers, and re- 
printed in The Oil and Gas Journal, March 1, 1923. 

{ The Oil Weekly, January 21, 1922. Weighted average computed by the author. 

+The Japhet lease of 20 acres operated by The Texas Co., had produced to the 
early part of 1928 about 12 million barrels in 5 years, or 600,000 barrels to the 
acre, and is still good for 4,000 barrels a day. 


OILDOM: ITS TREASURES AND TRAGEDIES 71 


ing the output to the end of 1923, and assuming that 15,000 acres—one- 
eighth of the state’s total—covers the proven territory in Los Angeles and 
Orange counties, the writer roughly gets 60,000 barrels per acre as the 
ultimate average yield of the Los Angeles basin.* 


Production Per Well. Knowledge of the usual or expected yield per 
normal well is of more practical value than that of the average yield of a 
field that is spotted, spectacular, or otherwise irregular. in the spacing and 
performances of its wells. (See Chapter XI.) The law of averages works 
better after a pool or property has passed its days of flush production. 
This law helps valuation engineers to prepare decline curves and future 
production curves so that the value of undrilled but proven oil land may 
be ascertained within reasonable limits.¢| Information as to the initial 
yield of a single well, particularly the discovery well that proves 160 acres 
centered about it, is of little value. The flow may be at an extra high 
rate because of the great original gas pressure, compared with the corre- 
sponding flow of later drilled wells; and this rate, stated for the first 24 
hours, may be based upon the actual yield during the first 2 or 3 hours 
only where the measuring unit is limited. Interested speculators and stock 
promoters advertise promptly and widely a well’s initial flow and refrain 
from publishing its daily record at the end of 30 days when the flow has 
become more or less settled and generally less than one-fourth of the 
initial. Appraising engineers prefer a monthly record extending over 

half a year at least, if the value of a property must be based upon the per- 
formance of a single well. Rarely does the rate of yield rise after the 
first 24 hours. Exceptions include: (1) The largest well known in the 

Cushing pool to the end of 1915, which increased from 10,752 barrels the 
first day to 10,848 the second day and settled to 4,000 within a week; and 
(2) a number of wells at Signal Hill or Long Beach, which in 1922 in- 
creased their flow after freeing themselves of sand. 

During September, 1923, the average daily yield of nearly 300,000 
wells in the United States approximated 2,250,000 barrels: or 7.5 barrels 
per well. The Census Bureau reported 37,400 wells producing oil or gas 
on December 31, 1889. In that year they yielded a little over 35 million 
barrels of petroleum or at the rate of 2.6 barrels daily, disregarding the 


*In arriving at this result, due consideration has been given to Joseph Jensen’s 
paper read before the Los Angeles convention of the American Association of Petro- 
leum Geologists in September, 1923. Estimates therein were made of the yield in 
1924 not only for Santa Fe Springs, Long Beach, Huntington Beach and several older 
fields, but also for Torrance-Redondo and the latest discovered field at Compton. As- 
suming the producing area of all California fields to be 60,000 acres (in addition to 
55,000 acres proven but undeveloped), and the total yield 1,800 million barrels to the 
end of 19238, the average output per acre becomes 30,000 barrels to date. Thickness 
of sands, their number, porosity, degree of saturation, pressure of the gas, and vis- 
cosity of the oil, are the chief factors affecting the ordinary recovery per acre. 

jt See page 73, revised “Manual for the Oil and Gas Industry,” by Fay, Reinholt, 
ete. Note particularly the Law of Equal Expectations advanced in 1918. The original 
edition of this Manual contains data of 11 years’ yield from 6 wells on an Oklahoma 
property from which the author has computed the yield per well per day. The re- 
sulting averages lend themselves to the construction of a typical decline curve, as 
follows, beginning with 1906 and ending with 1916: 25.6, 14.5, 6.9, 5.05, 3.22, 2.06, 
1.12, 0.75, 0.49, 0.26, and 0.10. The original ‘‘Manual’’ was prepared by Ralph 
Arnold, James L. Darnell, and others. 


72 OILDOM: ITS TREASURES AND TRAGEDIES 


number of gas wells included. On this basis of 750 million barrels output 
in 1923 the daily average per well approximates 7 barrels, an increase of 
4.4 barrels in a third of a century. Calculated from Census data, the 
daily average was 2.8 barrels in 1909, 4 barrels in the 5-year period of 
1910-1914, and 4.5 barrels in that of 1915-1919. The steady gain has 
been more marked during the past four years in the daily output per 
well than in the number of producing wells: 1920, 4.7 barrels from 258,- 
600 oil wells; 1921, 4.9 barrels from 274,500; 1922, 5.3 barrels from 285,- 
000; and in 1923, 7 barrels from 300,000 oil wells. 

Causes of Increase in Average Yield. Ordinarily the daily yield per 
acre or per well would drop off from month to month and year to year, 
as it has been doing in the older fields east of the Mississippi excepting in 
the few where artificial means* supplement the failing gas pressure that 
usually drives the oil through the porous rocks and into the pumping wells. 
Thus, in a certain part of the Illinois field, where no such process is used, 
the production per well fell from 3.22 barrels in 1911 to 0.99 barrels in 
1920. Artificial methods, such as vacuum, compressed-air, and water- 
drive, not to mention the mining of sands, could show a gain for the whole 
country if universally applied. But there is no economic incentive for 
such conservation as long as new fields, overlooked pools, and deeper 
sands are discovered at frequent intervals. The finding of these and their 
development are then the causes not only of the increased average daily 
or yearly yield per well but also of the great gain in aggregate production 
which is now enough to overflow our domestic markets. These two results 
are distinct inasmuch as it would be possible to have the same relative 
growth in the number of producing wells and in the total production with- 
out any concurrent increase in the yield per well. 

Overproduction of 1923 from Deep Wells. Practically all of the oil 
now coming from the three leading California fields—at a rate of more 
than 650,000 barrels daily during September, 1923,—has to rise from 
4,000 to 6,000 -feet to reach the surface; and that from the flush (Cor- 
sicana-) Powell field in Navarro County, Texas,—at a rate of 170,000 bar- 
rels—starts from a level nearly 3,000 feet deep. In other words, 36 per 
cent—more than one-third—of the petroleum being produced in the 
United States during the fall-of 1923 was coming from an average depth 
not far from 4,000 feet. These four fields, now among the first 6 or 7 in 
rank of current production rate, account for all the 700,000 to 750,000 
barrels increase in the course of a year since September, 1922, in which 
month the daily rate averaged 1,540,000 barrels. No other natural resource 
developed on a large scale has ever shown such a gigantic gain, almost 50 
per cent, in so short a time. This is all the more sensational since the 
record output was not reached in response to any sudden and inordinate 
demand for more petroleum. 

Tragic Consequences. A number of economic tragedies have resulted 
from this phenomenal and unexpected flood of mineral fuel: (1) Loss of 
crude oil through lack of gusher control and suitable storage; (2) upset 


*In the Allegheny and Bradford fields, Pa., 18,000 wells attached to one pipe 
line showed 23.8 per cent increase in 8 years due to the. so-called ‘‘water-drive” by 
which water pressure is put on the rocks. A shot of nitro-glycerine has also been 
known to rejuvenate an individual well. ; 


—Mining and Oil Bulletin. 


OVERPRODUCTION IN 
1923 HAS COME FROM 
DEEP WELLS, 
PARTICULARLY IN 
SOUTHERN CALIFORNIA 


Above appear two views 
of Signal Hill at Long 
Beach, one taken before 
and the other after devel- 
opment began. This over- 
developed field was discov- 
ered June 25, 1921, by the 
Shell Co. of Calif. Despite 
their large holdings there 
was, in August, 1923, only 
2 acres to 1 producer on 
the average. About the 
middle of November, 1923, 
the 272 wells were yielding 
about 240,000 bbls. daily. 
Estimated yield in 30 
months ending with Dec. 
31, 1923, 86,000,000 bbls. 
Deepest well, 5,972 ft. 


At left is seen the Shell 
Co.’s Andrews No. 3 well. 
It came in at 5,050 ft., be- 
ing the first producer below 
the 5,000-foot level. This 
compares with the average 
depth of 2,800 ft. for all 
the U. S. domestic yield in 
1921-22. 


74 OILDOM: ITS TREASURES AND TRAGEDIES 


in markets with the general bad effect of uncertain prices and the worse 
indirect effect of abnormally low prices for motor fuel upon the output 
of motor cars with all their attendant tragedies; (3) waste in use of 
products because of cheapened gasoline in particular; (4) overbuilding 
of storage and pipe-line facilities at great expense which the ultimate con- 
sumer must eventually stand; (5) financial failure of many small pro- 
ducers either from inability to store their crude product or from necessity 
to sell it at a loss; (6) elimination or reduction of profits, in turn cutting 
off, or down, the customary dividends to numerous stockholders of whom 
some may have no other source of income; and (7) consequent depression 
in the market value of securities of crude oil producers. To illustrate the 
last stated effect, the shares in 10 leading companies declined from the 
year’s high early in 1923 at an average rate of over 56 per cent to what 
they were quoted at late in September, that is, during a period of about 
six months. With reference to (5) and (6) the losses to some producers 
in 1928 must have been immense in their aggregate—much more than the 
net loss of nearly $60,000,000 on 551.2 million barrels crude marketed in 
1922 for. $775,000,000. 


CHAP. VI. ECONOMIC ASPECTS—Continued. 


A Demoralized Market and Past Price Fluctuations. The predicting 
of crude oil prices is as great a guess work as the forecasting of future 
production and the estimating of recoverable reserves for the entire 
country. Past price records are worthless in forecasting petroleum prices 
for short periods of one-half to three years in view of the fact that nobody 
knows just when and to what extent a sudden slump or a precipitous rise 
may occur in production, respectively through a simultaneous stoppage 
or slackening in nation-wide new development or through contemporaneous 
discoveries and stampedes of drilling in new fields or deep sands. De- 
spite the present demoralized market, better prices are bound to come, 
certainly within a year, since the majority of producers cannot and will 
not carry on much longer at a loss*. The only oil well operators who are 
profiting during the temporary stage of over-production are the few lucky 
lessees in the new fields of California, Texas and Oklahoma. Price control 
is apparently not in the hands of the older or more permanent producers. 
As a matter of fact, in their most important current aspects the oil in- 
dustry and the oil markets are dominated not so much by current events 
as by estimates or conjectures of what is ahead, either probable or possible.} 


Price changes in crude petroleum during the past ten years prove 
that the industry has not been coordinated and that fluctuations do 
not closely follow the prevailing trend in prices of necessities. Just after 
the outbreak of the War, crude oil quotations fell off while prices in general 
were boosted because of the menace to merchandising; and again, through- 
out 1920, prices for crude oil were maintained at the level of the latter 
half of 1919, while prices for most commodities continued to drop. In spite 
of many downward reactions, the price trended sharply upwards at an 
average rate of 22 per cent annually during the eight-year period, 1913- 
1920. Pogue claims this upward tendency is mainly due to (1), the increas- 
ing: cost to drill arising from the great number of well-feet per barrel; 
(2) the increased cost of labor and material, and (3), the mounting de- 
mand for oil products. However, except in fields nearing exhaustion and 
in so far as the high-cost areas set the price pace for the entire country, 
the cost of production does not dominantly influence the price of crude 
petroleum, which has to carry in addition the intangible but very appre- 
ciable item of (4), incentive for exploration. With steady progress toward 


*Out of more than 285,000 oil wells in the United States some 260,000 are 
being operated at a loss, declared W. H. Gray before the American Oil Men’s Associa- 
tion at their Chicago meeting, October 2, 1923.—The Oil Weekly, October 6. 


*Standard Daily Trade Service, January 27, 1923. Gilbert and Pogue, in Bulletin 
102 of the U. S. National Museum, p. 13, state that the price of crude petroleum (at 
any one time) varies considerably according to quality, distance from market, and 
other factors. The paraffin oils of light gravity, such as those produced in Penn- 
sylvania, are the most valuable because they yield the largest percentage of products 
in demand, while the asphaltic oils of heavy gravity, such as those from parts of 
California and the Gulf region, bring a price roughly a fourth of what the best quality 
oil commands. . 


¢ Page 241, “Hconomics of Petroleum,” published by John Wiley & Sons, Inec., 1921. 


(75) 


TO OILDOM: ITS TREASURES AND TRAGEDIES 


depletion of the resource, the increasing proportion of drilling needed to 
sustain output may be expected to make the cost of production rise and 
weigh more and more in the price outcome.* 


PRODUCTION AND WEIGHTED AVERAGE ANNUAL PRICE OF 
CRUDE OIL AT THE WELL 


At 5-year intervals since 1875 ae During the 11 years, 1912-1922 
Million Million 

Years Bbls. Dollars Years Bbls. Dollars 
ISSO 1S 70s. eae Aloo 74.1 2.92 FOV 23 Ree ort A eae 222.9 0.74 
WG CN Je ea 9.1 2.52 1019. ee ee eee 248.4 0.95 
TSSOs se ee ee ee, 26.3 0.93 1914 Se ee eee 265.8 0.81 
A Moko s eieetyaaranrt A By Meee oc Mince 21.9 0.94 TORO Se Be ee ae ees 281.1 0.64 
1 S9QS Sees) cose Ae eee 45.8 0.77 1916352 SS eS ee 22 SE SSS BAG 
y fio be 1a ee se Sees mee cee Sa eee 52.9 1.09 Oe ee ee eee 335.3 1.56 
LOGO 0 22S Ra es ae 63.6 1.19 BIS Wy Bo ak eee ma ce Sie Re ae 355.9 1.98 
tL D0) eS eee ee ee ee 134.7 0.62 TOTS eee eee ee ee 378.4 2.01 
29102 Se Dee Se 209.6 ° 0.61 1920353 Gee eee 442.9 3.07 
TOR oh ee rey ee 281.1 0.64 192}6 2 ee ee 472.2 1.72 — 
AO 20s eee Oe ee 442.9 * 3.07 a! A’ Seen or Mea es Spe ua. 551.2 1.66 


Variations in specific prices for particular grades have been greater 
than in average prices. Thus, because a market had to be made, Penn- 
sylvanian crude depreciated from $20, the earliest price on record, which 
persisted from September, 1859, to January, 1860, to $2 in December, 1860, 
and to 10 cents during December-January, 1861-1862, averaging but 49 
cents for the year 1861. This grade reached another peak in 1864, $14.00 
during July, the average for that year being $8.06. Extreme lows in 
Pennsylvania. prices were recorded as follows since 1862: 491% cents in 
July, 1882; 51% cents in June, 1884; 50 cents in August, 1891, and 50 
cents in October, 1892. The lowest average annual price of this high grade 
petroleum reached since 1862, when it was 49 cents, belongs to a year 
of very dull times, 1892, when it was 55.6 cents. Between January, 1869, 
when the specific price was $7 per barrel, and March to December, 1920, 
when it was $6.10, Pennsylvania crude sold at $4 or more only in these 
other years: 1870, 1871, 1872, 1876, 1918 and 1919. According to the 
U. S. Geological Survey’s report, “Petroleum in 1918,” by E. R. Lloyd, 
the average price per barrel for the 1,221.8 million barrels of Pennsy]l- 
vania crude produced in the entire Appalachian field from 1859 to 1918, in- 
clusive, approximated $1.43. The corresponding figure for the 787.4 mil- 
lion barrels of similar grade produced in Pennsylvania alone during the 
same period was about $1.45. 

Other fields have experienced exceptionally low prices for crude oil. 
The average yearly price of petroleum marketed in the Lima, Ohio-Indiana 
field during 1888 and again in 1889 was only 15 cents. These were the 
third and fourth years of its productivity, and then-for the first time this 
field furnished more than one-third of the total yieid of crude oil from 
the whole United States. In the Gulf field, during 1901, the year of the 
Beaumont or Spindle Top discovery, its 38.6 million barrels of heavy 


* The result will be complicated by the advancing use of engineering methods in the 
place of unorganized wildcatting, by a more scientifle analysis of depletion data, and 
by the growing strength of the demands for petroleum products, all of which tend to 
stimulate.increased prices for the crude.—M. L. Requa, General Director of the Oil 
‘Division, U. S. Fuel Administration. 


OILDOM: ITS TREASURES AND TRAGEDIES ft 


crude (not yet in demand for fueling) brought an average price of but 
17% cents per barrel, although this quantity made no more than 5.2 per 
cent of the nation’s output. The great gushers of the Midway-Sunset field 
in California prior to 1915 yielded so much oil that prices there slumped 
to the low level of 20 cents and storage was over-loaded. As a result of 
the war and the rapid strides of the automotive industry, the great surplus 
was wiped out.* Prices rose throughout the State and stimulated the 
search for new fields. The average price in California was 42.2 cents in 
1915; 59 cents in 1916; 91.8 cents in 1917 (the year of the Montebello dis- 
covery), and $1.218 in 1918, the first Pa that “dollar oil” had appeared 
in the State since 1894. 


PRICE CHANGES IN PENNSYLVANIA CRUDE OIL DURING 
9 MONTHS. TO OCTOBER, 1923 


Date Price Increase Date Price Increase Date Price Decrease 
Dec. 30, ’22 —-$3.00 Hebi ee Se $3.80 10 May Gres = as $3.75 © $.2 

ol fs iea vi 85 or Se Yipee og es WS es Po aes jE Ghia os ad AO 3.90 10 Maya 14 See 3.50 = 
GAS 0 aU oe ag ae 3.35 10 SGD On es Bene 4.00 10 DUNC. LO = 3.25 20) 
Ay in 7a boy a eee 3.45 10 Me pe | hi Ges 4.25 .20 SULY MO Soe 3.00 pa 
Jane Oe ae 3.55 10 Aprilia eS 40 -257 Sepbac0 mice ras PhS P20 


Premiums and Posting of Prices. The bulk of the crude oil produced 
in this country is purchased at open-market prices that are announced or 
“nosted” by big marketing companies or purchasing departments con- 
nected with the big refiners. Most of the oil is taken from the producers’ 
field tanks by pipe lines that are owned by or affiliated with the big re- 
fining companies and pumped through the lines from the fields to the re- 
fineries or to storage tanks of the purchaser. 

The posted price is the price at which one or more ofthe principal 
purchasers in a given field offer to buy crude petroleum at the producer’s 
tank. Some of the crude petroleum is bought direct by small refiners, who 
often pay a premium over the posted price. The producer, in selling to the 
large purchasers who offer to buy at their posted prices, has the advantage 
of an assured sale at any time, irrespective of quantity. Hence, the small 
refiner must offer the producer an extra inducement in order to secure the 
small quantities his refinery can usually take. 

When the small refiner pays a large premium it is usually for a par- 
ticularly desirable quality of crude; or because, in’times of declining pro- 
duction he is not able to secure sufficient quantities otherwise. On the 
other hand, in times of flush production small refiners have often been 
able to buy their oil at less than posted prices. When the large purchasers 
find that the proportion of oil sold at premium prices is so great that they 
have difficulty in securing oil to meet their own requirements, they advance 
their posted prices. 


*Wric A. Starke, formerly geologist with the Standard Oil Co. of Calif., quoted in 
the Wall Street Journal, April 27, 1923. See ‘Stocks, Storage and Stabilization” fol- 
lowing. Prices and stocks generally move in opposite directions. For view of Spindle 
Top see page 36. 


*Decrease. Altogether 7 cuts, aggregating $1.65, were made up to Nov. 13, the 
date of a 15-cent cut.—Bosion News Bureau. The geographic range of prices during 
1923 is given in Chapter VIJI. All prices of crude are at the well. Prices in most 
fields east of the Rockies rose late in December. Since the low of $2.60 for Penn. 
crude was established Nov. 13, its price rose $.25 Dec. 14, $.25 Dec. 26, $.15 Dec. 31; 
$.15 Jan. 7, 1924, and $.10 Jan. 10. 


78 OILDOM: ITS TREASURES AND TRAGEDIES 


The glut of oil from the Cushing pool proved calamitous to premiums 
for light oil of the Mid-Continent field. The posted price in 1915 sank to 
40 cents per barrel, though large quantities also sold as low as 25 cents. At 
other times premiums have gone to unprecedented levels, and in the 
Ranger Field, where the production fell off sharply in 1920, they ran as high 
as 50 cents per barrel. In the Garber pool, Oklahoma, the scarcity of 
high-grade refining crudes resulted once in the payment of premiums as | 
high as $1.75 per barrel.* 


Causes and Cures for Overproduction. Domestic production seemed 
to satisfy demands quite fully up to 1916. Beginning with that year a gap 
occurred and gradually widened so that in 1920, notwithstanding the great 
gain of 65 million barrels over the yield the year before, the shortage 
amounted to 87.5 million barrels of crude oil. In 1921 the shortage was 
practically 54 million barrels and in 1922 only 35 millions. In the mean- 
time, Mexico had been more than filling the gap so that a reduction of 
23.5 million barrels in stocks during 1916 was changed to a surplus of 
over 62.5 barrels at the end of 1921. Exports of crude petroleum have 
never proven to be an important factor; they increased from hardly 5 
million barrels in 1918 to little more than 10 millions in 1922, the average 
from 1913 to 1917, inclusive, being but 4 millions. 

Sensational reports of the salt water invasion of the southern or light- 
oil district in Mexico, circulated early in 1921, certainly stimulated wild- 
catting in the United States. As a matter of fact, Mexican shipments to 
our country have been maintained at a remarkable rate. despite a partial 
realization of the pessimistic forecasts. (See Chapter IX.) Asa result of 


A CONTRIBUTOR TO OVER- 
PRODUCTION 


The deep Powell pool 
(Woodbine sand) in the old 
Corsicana field was not found 
before January, 1923, and 
since has furnished a great 
sensation, in October, putting 
Texas next to California. 
This view shows a _ shallow 
well of the original Powell 
pool (650 to 950 ft.) opened in 
1900; the deep development is 
pictured in Part Two. 


—The Oil Weekly. 


the wide-spread wildcatting, a number of new fields have been found north 
of the Rio Grande, one of them even close to the Canadian line, namely 
the huge Kevin-Sunburst field in Montana. Fear of a failing supply from 
Mexico can scarcely be blamed for the great discoveries and the resultant 
enormous over-production that have occurred in California. It is this over- 
abundance of high gasoline oil in a State which hitherto had been ecnomic- 
ally extraneous—as far as it affected the region east of the Rockies—that 
has sort of dynamited the markets of the east and the middle west. Great 

*Pages 3 and 32, Report of the Federal Trade Commission on “The Advance in 


Price of Petroleum Products,’’ published in 1920 as House Document No. 801, 66th 
Congress, 2nd Session. 


OILDOM: ITS TREASURES AND TRAGEDIES 79 


as the gain has also been experienced east of the Rockies, the American 
market could easily have absorbed it all because of the abnormal, even out- 
rageous, advance in the output of automobiles and because of the ten- 
dency to substitute fuel oil and kerosene for coal wherever feasible. 


Four causes for the excessive yield in California have been stated by 
Ralph Arnold.* (1) The false assumption that initial production can be 
counted on as the average for the life of the field, deluding many into 
drilling where fewer wells and slower development would prove the proper 
and (more) profitable solution; (2), rapid development through the use 
of rotary drills at twice the cost of cable drilling; (3) small holdings 
which have induced intensive drilling, and (4), stringent lease requirement 
for offset drilling. President Thos. A. O’Donnell, of the A. P. I., speaking 
at the St. Louis meeting in December, 1922, 
referred to two reasons for the scandalous 
over-production in California: (1) When oil 
was at a good price extreme competition be- 
tween the active companies of the State for 
leases which brought about heavy drilling 
operations as well as extravagant bonuses and 
royalties, and (2), following that there has 
been a development of the well-known pro- 
moter type. 

Various remedies have been proposed to 
rectify the resultant depressed situation which 
has prevailed throughout the entire petroleum 
industry with the exception of the tanker trade 
and the business of building pipe lines, storage 
and refining facilities. The State of California 
has made more rigorous the requirements of 
small and speculative operators to have a large oS 
bank deposit before being granted a permit to PRES. THOMAS O0’DONNELL 
drill. Some Burbank (Okla.) operators agreed, ee hate, 1993 Bee 
as long ago as late in April, 1923, to stop new —The Oil Weekly. 
wells near the top of the sand and not drill them into production until 
pipe line facilities had been improved. Additional storage as well as 
needed pipe lines have been provided. The drilling of new wells has been 
suspended here and there, and old wells, particularly those farthest from 
tidewater, have been pinched down or shut in completely so that one time in 
the late summer of 1923 it was estimated that the potential production 
exceeded the actual output almost half a million barrels per day. Pipe line 
companies have compelled curtailment on the part of producers by pro- 
rating the pipe runs. These various remedial measures of an economic 
nature must not be confused with conditions which are subject to tech- 
nologic control and which retard capacity production such as improper 
shooting of wells, water not shut off, improper cleaning with packed sands 


*Address quoted in Mining and Oil Bulletin, August, 1922, published by the Cali- 
fornian Chamber of Mines and Oil, Geo. M. Swindell, Secretary. 


80 OILDOM: ITS TREASURES AND TRAGEDIES 


KARTHEN STORAGE OF 
VERY HEAVY OIL 
Kern River field, near 
Bakersfield, Calif. 


This oil contains very little - 
gasoline and kerosene and thus 
the evaporation loss is low. 


INTERIOR OF A HUGE 
CONCRETE LINED RESER- 
VOIR, ONE OF 5 IN A TANK 
FARM NHAR SAN PEDRO, 

CALIFORNIA 


Capacity is 750,000 barrels 
each or an average day’s pro- 
duction of the 10,000 Califor- 
nia wells in 1923. Note the 
roof supports and the chief en- 
gineer, H. G. Smith. 


‘ —Oil and Gas Journal: 
WASTEFUL OPEN STORAGE OF CRUDE OIL CONTAINING LIGHT 
PRODUCTS, SMACKOVER, ARK., 1923. 


While the bulk of the Smackover oil is heavy it is not as heavy as the Kern 


River oil of California and yields some gasoline and kerosene that is quickly lost 
through evaporation in open reservoirs. 


OILDOM: ITS TREASURES AND TRAGEDIES 81 


and clogging up of sand pores and casing perforations with asphalt or 
paraffine.* 

Stocks, Storage and Stabilization. Large stocks of crude oil carried 
above ground have the evident effect of steadying markets when the rate of 
production is either stationary or declining, and’ capacious storage facili- 
ties have the same effect in the face of a rising rate.+ Storage construction 
has been stimulated perhaps to a point beyond future needs if the industry 
would but recognize the economic advantage of relying more upon the 
natural, inexpensive and non-wasteful storage underground. In 1923 it 
cost 27 cents a barrel or $200,000 each to build permanent concrete reser- 
voirs of 750,000 barrels capacity. During this closing year of tragic over- 
production, the big companies in California kept their reserves under- 
ground as far as possible and bought their needed oil from the mushroom 
operators while awaiting better prices for their own product. It is of. 
utmost economic importance to know that crude oil desirable for gasoline 
cannot be held long in storage to advantage or profit. 


TREND OF CRUDE OIL STOCKS IN TERMS OF THE COUNTRY’S 


NEEDS 

Year Stocks, Dec. 31 Mos. Supply Year Stocks, Dec. 31 Mos. Supply 
1909 tiga, phbisies 23a 8.4 1916 162 mMil Se bps et. ae 6.1 
1910 gf Rg rn Lea = Yee aa 8.2 1917 LAG; «* td Cee Re i oe 4.7 
1911 (Con DS SURES So ie a 7.8 1918 A Se 6M se AO a Oe BE 
1912 a 3 Nae a hs on pe a A ON i 6.2 1919 L285 -* A wean ke Speeds 3.1 
1913 a 43 WSs A cae aap Sea ee ay 4 G2 O vre 4Go LAD wend et LT be oe B78 
1914 142-3% Sr 9) cee ee ee 6.5 1921 9 lege oe part oem) Mahe. - 4.5 
1915 164 ‘ <_  aeerae y F  e ifv? 1922 26D0n ah ees 37 CaS 5.4 

MEVCHIS SAVOrAP CG. eo, fie VEATRs a VER Leo Tee 4.5 


On September 1, 1923, the stocks of crude petroleum held elsewhere 
than on leaseholds in California and at refineries throughout the United 
States aggregated 298 million barrels. This was sufficient for 5 months’ 
consumption at 59.5 barrels per month, the average for June, July and 
August. 


To provide for all contingencies, such as war or a geological catastro- 
phe, it would not be unreasonable for this country to carry a reserve sup- 
ply of petroleum and its products equal to a year’s consumption (if it were 
not so immense).{ This has always been referred .to as something im- 
possible in view of the mounting domestic demand. Below is summarized 


*The Lamp, house organ of the Standard of N. J., Dec., 1922, answers the query, 
How can an oil-producing concern slow down and reduce its output when there is an 
excess of oil? with two suggestions: (1) Cease sinking new wells if his property is not 
all drilled up; and (2) if lucky enough to own all of a pool he could tap it as desired, 
closing his wells when the prices were unsatisfactory or speeding up production when 
they were advancing. Unfortunately, almost all important producing territory is 
divided among many owners or lessees; and so long as one of them produces regardless 
of market conditions the others must follow suit or see their oil underground taken 
away from them. Arnold has condemned our present leasing system as inconsistent 
with ideas of conservation. 


jRead “Storage as a Relief for Overproduction,” The Oil Age, Sept., 1922, p. 15. 
tOiu. Paint and Drug Reporter, June 11, 1923, page 45. 


82 OILDOM: ITS TREASURES AND TRAGEDIES 


in round numbers the inventory of all forms of mineral oil in the United 
States as of September 1, 1923.* 


Mil. Bbls. 

Domestic pipe-line and tank-farm stocks plus imports (U. S. G. 8.) ---------- 298 
Crude oil held at refineries (84% domestic, 16% Mex., Bur. Mines) ____________ 34.3 
Total crude petroleum, except most producers’ lease stocks______________ oo2.e 
Partly refined oils held at refineries (Bureau of Mines) _-_-_-__-__--__-_-=_---= 30.7 
Total crude oil and other unfinished forms=2 22 2 eee 363.0 

$ Finished Products (Bureau of Mines) : 
Gas and fuel oils (1462.2 million gallons at 42 gallons a barrel) ____________ 34.9 
Gasoline (1053.9 ts fs con AD, Scag (  ) eee 2570 
Kerosene ( 2438.6 ue “ come Paes 0) 5.8 
Lubricants ( 220.4 S st SrA’, pha 8 1G (2S ey 
All others (23120 “ sana Sodas (‘3822 0.7 
(Total 8011.1 mil. gals:, or 71.6) mil. «bbis. fine sprod:) 

Grand total stocks of crude, partly refined and finished___________________ 434.6 


| Finished products not susceptible to liquid measurement included 
128,000 short tons of asphalt, 87,500 tons of wax and 20,500 tons of coke. 
The average monthly rate of increase in pipe-line and tank-farm stocks 
plus imports has been as follows, in millions of barrels since the depletion 
period of 1915-1918: 0.5 in 1919 (over 1918); 1.5, 1920; 3.3.92 ea... 
1922, and 5.6, 1923, based on the first eight months’ accumulation. It will 
be noted from the second preceding table that the stocks of crude not at 
refineries have more than doubled in about nine years; nevertheless we 
have ahead one month’s supply less than we had at the end of 1914, or 
three months’ supply less than we had at the end of 1909, notwithstanding 
the tremendous gain in production in 1923—almost 500 million barrels be- 
yond that of 1914, or 575 million beyond that of 1909! 


THE REFINING INDUSTRY 


Manufacturing Operations and Refined Products. Advanced informa- 
tion from the Department of Commerce} indicates that petroleum refining 
now ranks above all other manufacturing industries, except “Slaughtering 
and Meat-packing” in point of value of products. Expressed in millions 
of dollars these values for the 12 leading industries in 1921 were as follows: 


Se Me ed a 


Slaughtering and meat-packing__$2,201 8... Flour and erist) miss $1,180 
Petroleum. rellning. 2.5 3a a 9. Printing and publishing period- 
Automobiles (including trucks)_. 1,671 ieals: 22 oo See 1,124 
Foundry and machine shops____-— 1,565 10. Bread and bakery shops_=—____ 1,090 
Steel Works and ralling mills__ 1,482 11. Women’s clothes making_______ 1,023 
Cotion=>iill ss. ee a eee 1,278*+..12.-Men’s. clothes making=s22. 220 935 
Railway. - repairs -shopse-2=—2- == nae US thea) —--- 
Total for 12. industries____ = $16,456 


Petroleum refining precedes all these industries in respect to 
the value of output per wage earner. The Manufacture of motor 


* C. O. Wilson’s figures for this date, Sept. 1, 1923, published in The Oil and Gas 
Journal, Sept. 138, differ slightly from the author’s. His sources are probably the 
same, U. S. Geological Survey and Bureau of Mines; but he evidently includes all 
stocks held on leases and markets in order to arrive at the greater grand total of 445.6 
million barrels. His pipe-line statistics are gross, thus a few millions more than the net 
figures of the Survey. 


7 Courtesy of Eugene F. Hartley, Chief Statistician for Manufacturers, Bureau of 
the Census. ; 


OILDOM: ITS TREASURES AND TRAGEDIES 83 


vehicles is looked upon as highly efficient, but its 143,658 wage 
earners in 1921 averaged only $11,640 each compared with $27,340 for 
each of the 63,189 employed in petroleum refining. In that year there 
were 366 petroleum refineries in operation and 385 establishments making 
automobiles. The number of different individuals or corporations operat- 
ing refineries in 1919 was probably less than three hundred* compared with 
9,814 operators in the natural resources of both gas and petroleum. 

Petroleum refining has grown more rapidly than any other branch of 
manufacturing except automobile making.* 


; Wage Value Wage Value 
Census Year Earners of Products Census Year Earners of Products 
pH OE a eed 1,473 $6.4 million BS Thc Sa tt On eee 16,770 $175 million 
Ree eet 1,870 26.9 pe 7900 ee ees 13,929 237 aie 
aro Leer 9,869 43.7 he OT 4a a ee ~ 25,366 396 A 
vt to) ll see 11,403 85.0 a oe He ig SS ae ont ie 58,889 1,633 oe 
LeOo Sse 12,199 123.9 ss cb a a Gato sou tet 4 


The gain in the 10 years, 1909-1919 was 323 per cent for wage earners 
and 590 per cent for value of products. - 

Herewith are tabulated the actual quantities of the different refined 
products and their total values for the year 1921, as published by the 
Bureau of the Census in 1923: 


Million Value Unit Value 
Refinery Products Gallons Millions Cents 
CSONSROW BENELLI Sh i a ee ee 5,098 $ 840.7 16.45 
NaGitoe ewouZING. Ot: ~.oses2t J. 5 no 275.2 40.7 14.8 
EROtaimTonbest WLOCUC Use ==. == Dolton $ 881.4 16.4 
ECOMISL Tea LLC TOL ae met 2 a Se ee ee SS 6,894.5 232.4 Bee 
SO Sm Sea ae ne es as ee ee 1,634.3 Spio 5.2 
PRS Hey COR emcee ate ce ee ve Ree A 1,220.3 59.6 4.9 
mniaueruet mili #8 secre: oP es a 9,749.1 $ 377.3 3.87 
Witiminatins’ oils, (kerosene) ===... £22. = 1,963.8 bo ass 7.8 
eich wile aOLISWeesse = eRe Sree eS 949.2 194.6 20.5 
Dotaletolse es JOG DrOductss2= == soe 2S 18,035.3 $1,605.8 8.9 
Greases (petrolatum, axle g., etc.) —~--------- 24.4 $ 9.8 40.0 
AST asec mn Od Coe Olsen ses ey ee ee 168.4 7.8 4.6 
All other products (wax, asphalt, coke, candles, 
CS) ape ay eee ie ees SOD FER ro i Eh 2 * 104.1 Te es 


COL ee DV DEOGUGLS 2 ce cece Ces a IY (4.0 mil. tons) 


$121.7 ($39.20 a ton) 


*In 1919 158 refining companies ran 84 per cent of the total refined crude through 
their stills; probably no more than 162 smaller operators refined the remaining 16 per 


cent. 


On January 1, 1922, according to the Bureau of Mines, there were 270 different 


active operators of 325 plants with a combined refining capacity of 1,854,590 barrels 
per day. At the same time there were shut down 154 refinerics of 254.610 barrels daily 


capacity. 


See Chapter VIII for their geographic distribution. 


7 These may all be considered as gas-engine or motor fuels—‘“motor spirits” as 


they are designated in the British Empire. 


¢ In the absence of Census details, the author has apportioned these approximately : 


asphalt-——1,200,000 short tons; coke—1,000,000; paraffin wax—225,000; besides the 
575,000 tons of asphaltic oils and 100,000 tons of greases above expressed in gallons; 
and miscellaneous—900,000 tons. The unit values have been determined by the author. 
The percentage relations in quantity are shown at the end of Chapter IV. 


84 OILDOM: ITS TREASURES AND TRAGEDIES 


Converting the liquid measure of the major products into short tons— 
about 63 million tons—and adding this to the weight of the by-products 
makes but 66 million tons, or roughly, 13 million tons less than the yield 
of crude in 1921. Part of this difference is due to direct consumption of 
crude; part is accounted for in crude run into storage instead of into 
stills, in losses of liquid from leakage and evaporation, and in worthless 
residues. If these figures are correct, they indicate that by-products con- 
stituted 6 per cent of the weight, or likely little more than 5 per cent of 
the bulk, but contributed 7 per cent to the total value of refinery products 
in -LoZie 


A Chronic Problem. Fundamentally the refining of petroleum is un- 
like any other process of manufacturing except meat-packing. From the 
raw product of the mine, the forest, or the field the manufacturer need 
produce only the article or thing. that his consuming public may. prefer, 
whether radio sets, steel plates, fancy shoes or fine furniture. His basic 
raw material does not change and his apparatus, process and methods 
can be standardized. Not so with the oil refiner as his raw product changes. 
with the discovery of each new pool and usually presents a new refining 
problem. During the first fifty years’ growth of the industry, kerosene 
was the primary product and processes were developed for its maximum 
yield. From a market requirement of 58 per cent kerosene and 9 per 
cent gasoline in 1900 there was a change to a demand for 24 per cent 
kerosene and 26 per cent gasoline in 1914.7 


Not commercially correct but economically true are the following re- 
lations, according to Pogue: Gasoline receipts pay for the raw material; 
kerosene for refining, and fuel oil for marketing, leaving the receipts from 
lubricants as profit. He concludes that skimming plants are profitable 
only in periods of flush production. In Texas alone, on January 1, 1922, 
there were 46 such plants shut down out of 97 refineries exclusive of eight 
skimming or topping plants being built. Such evidences of inexperience, 
miscalculation or mismanagement are monuments similar to the many 
milling and reduction plants that dot. the gold and silver districts of the 
West where deep exploration did not precede construction. As a whole, 
the industry has to stand the expense of these emblems of tragedy as it 
_has also to cover the cost of the numerous dry wells drilled each year. 


*The petroleum refining activity is the largest and one of the most efficient 
chemically controlled industries in the United States. Yet while the most competent 
branches of the activity have carried the production of the main products forward 
with effectiveness, they have not been able, alone, to draw more than a modicum of 
value from the by-product possibilities inherent in the resource. During the past only 
10 per cent of the total value ascribed to refined products was credited to some 200 
by-products which made up 15 per cent of the total bulk (not weight) of products and 
waste. The waste made 5 per cent of the total. The cost of refining has been borne 
by the four main products—gasoline, kerosene, fuel oil, and lubricants—which con- 
stituted 90 per cent of the value and made up 80 per cent of the bulk, until more 
recently, as shown above. See part 6, bulletin 102, National Museum, by Gilbert and 
Pogue, 1918. 


7E. M. Clark in The Lamp, February, 1915. In minor disagreement—as to designa- 
tion—F.. A. Howard wrote in The Oil and Gas Journal for Dec. 9, 1921: “Not manufac- 
turing, but merely the separation of crude petroleum into its parts and then cleaning 
and polishing the parts.’’ 


OILDOM: ITS TREASURES AND TRAGEDIES 85 


True Cost of Refined Products. Because of these and other condi- 
tions it becomes very difficult to determine the true cost of gasoline and 
other refined products, as brought out before the hearings of the Senate Sub- 
Committee on Manufactures. One of the witnesses, Mr. Coombe, of Ohio, 
likened the problem of costs of various oil products to the problem of a 
butcher who buys a whole beef and cannot determine what the porter- 
house in it costs compared with soup bone: The demand for the porter- 
house carries the soup bone (which is often thrown away); the demand 
for gasoline carries (in part) other petroleum products. This expert 
kad studied it for years with discouraging results. Engineers for the 
Federal Trade Commission, after intensive study during the war, found 
it impossible to get at the true cost of gasoline in particular. The Census 
of 1919 made no effort to spread the costs over the different products, giving 
only the costs for the refining industry as a whole. Itemized, these were: 


pose Mmalion. Darrels crude petroleum, at $2.38_.-_____-._.-__ ssc $867,646,475 
A Ome Daeee sy CIstll ates = = Sr a ee eS Se 151,824,598 
uembiona parrelsscasing=h ead. casolnegsw eS. — 2. ae Fe 59,857,628 
16.7 million thousand feet? or cubic feet wet natural gas____________ 1,256,834 
Chemicals : 
TOM GIS CAIs ine SOU a = = 2 Sets Soe ee SS oe 1,736,670 
NOS LUO ee TOMS eSUIMIITLC RClQ. 225 2a a eo ee ee 10,327,060 
BOL a uGiin a ries ss ee 8 ty Be See ee eS 224,700 
pe eee LOMB aS UL foEtl a 2.5 eo = = eee er ee 136,828 
2 OLMere elven Cr) Sere eee Se ee See ae 663,660 
Tee SCAT teat f Ol et eTil yee ee ee Ee Tn 2,9 6Dgh 20 
Containers and materials therefor : 
WOoGctmts+ cOl ton, metal, $26,193,0 Td. total. =a a ee ee 60,994,807 
SY CU te a re ee ee ee es ee oS oe 37,358,257 
Te ieee ent (EO be cTON Ole ne ee eee eB 53,505,109 
Total cost of material, containers, fuel and power______________ $1,247,908,355 
Unit cost of the 415 million barrels of liquid petroleum_____________________ $3.00 


The above unit cost allows nothing for depreciation of plant, expendi- 
ture for labor, and various outlays for overhead charges, which alto- 
gether have to come out of the $384,624,411 value added by manufacturing 
according to the same Census. 


Present Rate of Yield in Major Products. The average daily rate of 
refining during July and August, 1923, was equivalent to annual rates as 
follows for the four leading refinery products, based on the latest Bureau 
of Mines statistics,* which indicate that the quantity of crude run through 
the stills this year will approximate 615 million barrels, including im- 
ported oil to the extent of 4 per cent: 


Per Cent 

Refinery Product Million Gallons Million Bbls. of Crude 
ORR o/s ba i ae aD BEE 7,570 180 29.4 
GOT eee pee Mie ns alo Ra ee 2,210 52.5 8.6 
ereue seria ka ek 12,150 290 47.5 
LO Nek Yo) ge ape ed ae ee 1,070 25.5 4.2 
Lotalswour -Major’-Productss._—.-.—= 23,000 548 89.7 


From the above it appears that twice as much kerosene as lubricants 
is being produced; more than twice as much gasoline as of the former two 


*Compiled by W. C. Hill, Petroleum Economist, Department of Interior. 


86 OILDOM: ITS TREASURES AND TRAGEDIES 2 


together; and almost four times as much gas and fuel oils. Compared 
with 481 million barrels of the same products obtained in 1922 the apparent 
increase is only 14 per cent as a whole; but for gasoline the increase is 
22 per cent, the yield being 147.6 million barrels or 6,202 million gallons 
in 1922. 


| Gasoline 
Kerosene 
Fuel & Gas Oil 
Lubricating Oil 
Wax, Coke & Asphalt 
Miscellaneous 
Loss 

Total, 


WAX, COKE mo 


. ; abe 


WHAT THE REFINERS GOT OUT OF A BARREL OF CRUDE ABOUT 
TWO YEARS AGO 
Less gasoline than now, but more kerosene and lubricating oil 


Because of the stimulus to refinery construction in California the daily 
potential of all the refineries in actual operation must now, towards the 
end of 1923, be nearly 2,100,000 barrels daily or 200,000 barrels short of 
the maximum daily production of crude oil. In general the actual runs 
make 70 to 80 per cent of the capacity, considering only the plants in 
operation. Counting all those being built, shut down, and in operation, 


OILDOM: ITS TREASURES AND TRAGEDIES 87 


the aggregate number and capacity at the beginning of each of the past five 
years were: 1918, 267 plants, 1,186,000 barrels; 1919, 289—1,295,000; 1920, 
472—1,530,000; 1921, 469—1,889,000; 1922, 509—2,164,000.* 


TRANSPORTATION OF PETROLEUM 


The liquidity of crude oil has led to the development of a remarkable 
system of transportation without parallel in its cheapness and efficiency. 
This system comprises a network of pipe lines spread over much of the 
country, supplemented by specially designed tank-steamers for coastwise 
and foreign trade. A relatively small quantity of crude is handled by the 
railroads in tank-cars. To a preponderant degree, therefore, the move- 
ment of mineral oil is independent of the normal carrying agencies upon 
which commodities in general depend.} 


Railway Transport. Tank-cars are mainly used for hauling refined 
products. During a recent period the railways derived 52 per cent of all 
their revenue freight from the products of mines, quarries and oil wells. 
Crude petroleum constituted only 1.2 per cent of the tonnage of these pro- 
ducts, or 0.6 per cent of all the paying freight handled during that time 
by all the railways of the United States. The number of tank-cars in the 
United States and Canada on January 1, 1914, was nearly 50,000; seven 
years later the number had reached 137,500. In May, 1923, the Interstate 
Commerce Commission issued estimates of the revenue per car of various 
commodities on the basis of 1922 tonnage at 1923 rates. This revenue by 
the individual railway from petroleum was placed at $86.28 compared 
with $79.28 from anthracite, $64.20 from asphaltum, $63.17 from bitumin- 
ous coal, $45.17 from iron ore, and $35.72 from gravel, sand and stone. The 
highest car rate for mineral products was from base bullion and matte, 
$164.52. The three highest rates for agricultural products were from dried 
fruits, $133.73; wheat, $121.75, and citrus fruits $115.41. 


Pipe Lines. Before the advent of the tank-car, the tank-steamer, and 
the pipe line it was not an uncommon sight to see a string of half a hun- 
dred wagons hauling the-oil from the wells to the refineries hundreds of 
miles distant. This furnished employment to many men and teams, and 
these men naturally became jealous of any system that meant the loss of 
their jobs. The.result was that the pioneers’ attempts to transport oil by 


* Published January, 1923, in Mining and Oil Bulletin, of Los Angeles, and in- 
cluding data of small refineries that failed to answer the questionnaires sent out by the 
Bureau of Mines. Late in 1923 the potential of all refineries, whether operating or not, 
must be close to 2,300,000 barrels. 


+ Joseph HB. Pogue’s “Economics of Petroleum,” John Wiley & Sons, 1921. 


Alfred Liggett, Editor of the (London) Petroleum Times, wrote in his book, 
“Petroleum” (1919): ‘About 50 years ago a few master minds came to the front, 
and loyally supported -by John D. Rockefeller, undertook the herculean task of practically 
girdling the United States with a system of oil pipe lines that has no parallel any- 
where. They eliminated the jaded horses, oil boats, wooden tankage and slow freights— 
all tedious methods and questionable practice of handling petroleum—and substituted 
therefor the steampump, the iron conduit, the steel-tank storage and systematic and 
businesslike methods which soon commanded the confidence and respect of all oil-pro- 
ducers. They extended their pipe-lines to almost every producing well and established 
a transportation system which serves the industry to-day as no other on earth is 
served. The advantages of the modern pipe-line to the oil-producer (and indirectly to 
the investor) are very obvious,” 


88 OILDOM: ITS TREASURES AND TRAGEDIES 


pipe line were repeatedly made in vain, the lines being destroyed time 
after time. It was only by the constant guarding of the property that — 
the system was finally placed upon a safe basis. Now millions of people 
walk and ride daily across these underground conduits, unconscious of 
the fact that beneath their feet is flowing the crude product on its way to 
be refined for use in running and oiling their motor cars and in lighting 
or heating their homes.* 

These buried pipe lines now carry to renherice nearly all the petro- 
leum; discharged by the 300,000 live wells in the United States. They 
measure almost 60,000 miles, three-fourths being main or trunk lines. — 
Their aggregate length makes over one-fifth that of the railways or 
sufficient two and one-half times to belt the earth at the Equator. Un- 
like the railways, whose routes are controlled largely by relief, the pipe 
lines extend in fairly straight courses. 

Through an act of Congress the pipe lines must be operated as com- 
mon carriers. In common with the railways they are supervised by the 
Interstate Commerce Commission “for the purpose of assuring that the 
charges and facilities for transportation shall be reasonable and that there 
shall be no discrimination between shippers.” As a rule the tariff rates 
of the trunk pipe lines have ranged from 50 to 70 per cent of the railway 
rates for shipping crude oil the same distances. In 1916 it cost the 
shipper 70 cents to “pipe” the oil from the Cushing pool in Creek County, 
Oklahoma, to either Baltimore, Md., or Bayonne, N. J. Local gathering- 
line cost per barrel has rarely been less than 4 or 5 cents. As of January 
1, 1922, the 33 principal pipe-line companies in this country reported 
$365,000,000 invested in pipe lines alone besides $287,100,000 in tank farms 
and other facilities. 


Tanker Transport. While pipe-line transport of refined oils in par- 
ticular is less expensive than railway haulage in either tank cars or small 
containers, water transport of any kind of oil in bulk is by far the cheapest 
method of moving it to market or refinery. For instance, in July, 1923, 
gasoline bringing 10 cents a gallon at Oklahoma refineries could not be 
laid down at New York under 15 cents, while California gasoline could be 
delivered there at 12 cents, although it must be carried nearly three times 
the distance.t In fact, at no time is it as economical to carry crude nm 
pipe line when water transport is available. 

Prior-to the development of the bulk-oil carrier, practically all ship- 
ping was done in barrels and in wood-enclosed cans, the latter known as 
“ease oil.” In 1885, about five million barrels were exported in barrels 
but only forty thousand in bulk; less than twelve years later, shipments 
in barrels had dropped to forty thousand while the transport of bulk oil 
had risen to 11.5 million barrels, thus more than reversing the ratio. 
“Gluckauf,” first modern tanker, was built in England in 1866. It was 
provided with a safety space between the boiler room and the oil storage, 


*“Wages and Hours of Labor in the Petroleum Industry’’, Department of Labor. 


*They do not carry the oil all the way to the refineries; in some cases only to 
tide water for further and principal transport by tankers. In the case of the new 
California fields the distance is less than 15 miles on the average as two of them, 
Long. Beach and Huntington Beach, are situated on the seacoast. 


tN. O. Fanning’s “Transportation Costs of Retined Oils,’ Oil and Gas Journal, 
Aug. 2, 1923. ; 


OILDOM: ITS TREASURES AND TRAGEDIES 


allowance for expansion of the oil when 
heated, and reduction in the danger of 
the oil shifting with the roll and pitch 
of the vessel, thus differing from those 
earlier built to carry the liquid next to 
the “skin” of the ship. Since that year 
the increase in size has been no less re- 
markable than the growth in the number 
of tankers. The greatest impulse to this 
arose with war time requirements. Be- 
fore 1915, the average deadweight of 
bulk-oil steamers was less than 6,000 
tons, but now it is nearly 10,000 tons or 
60,000 barrels. The largest tanker, the 
S. S. “William Rockefeller,” registers 
20,000 tons and has a capacity of 140,009 
barrels.* ) 

During 1919 and 1920 also, there was 
a big gain in tank steamers, due mainly 
to the expansion in imports from Mexico. 
All the big oil companies using them 
added greatly to their tonnage and at 
the same time the U. S. Shipping Board 
built some 80 oil tankers. But in 1921 
a collapse occurred in the oil markets, 
and much of the new tonnage went out 
of use and nearly all the boats of the 
Shipping Board were tied up. Early in 
1923, the trade between California and 
the East through the Panama Canal be- 
gan to grow so great because of the un- 
expected flood from the new fields of the 
Los Angeles basin, that all available 
tankers were required. The Shipping 
Board was enabled to charter its idle 
vessels at high rates—up to 90 cents a 
barrel—and to sell many of them, at the 
low price, however, of $85 to $40 per ton. 
Before September, about 55 of the gov- 
ernment tankers were taken over by pri- 
vate interests besides those under char- 
ter.f | 
The ocean rate on crude from Cali- 
fornia to the North Atlantic was 82 
cents about September 1, 1923, a 27 
per cent drop from the peak of $1.12 
reached last May. The decline was 
partly the cause and partly the result 

* John G. Pew’s ‘Modern Tank Steamers’’, 
Mining and Metallurgy, December, 1922. 


{World Shipping Turns to Oil’, The Qil 
and Gas Journal, Sept. 6, 1923. 


S. SHIPPING BOARD TANKERS AT MOBILE, ALA., 


89 


30, 1922, TO THE UNION OIL CO. OF CALIF. GROSS 


SOLD DEC. 


wo. Us 


—Courtesy of Union QOil Bulletin. 


70,000 BARRELS EACH. 


ABOUT 


CAPACITY 


TONNAGE ABOUT 7,075 EACH; 


90 OILDOM: ITS TREASURES AND TRAGEDIES 


of the demoralization of the oil industry traceable to over-production. For 
October, 1923, the rate was even lower, only 70 cents, and applied as well 
to gasoline as to crude for loading at San Pedro, California, as far ahead 
as January, 1924,* Early in October a Norwegian tanker was engaged to 
take crude from Tampico, Mexico, to Fall River, Mass., at only 27 cents 
a barrel compared with this year’s high of 50 cents. The continued reduc- 
tion is due no doubt to the over supply of tanker tonnage; over 400 bulk- 
oil ships being on the California run alone late in August with the com- 
peting operators realizing that a slackening demand is sure to come sooner 
or later.j The latest cuts made it possible to move gasoline at a cost of 2 
cents from California where it could be bought in bulk at 6 cents, making 
the total 8 cents a gallon at New York. This will likely never happen 
again, in the history of petroleum. 
NUMBER AND TONNAGE OF THE WORLD’S TANKERS, JUNE 30, 1923. 
(Bureau of Navigation, Dept. of Com., 9-1-’28.) 


Thousand - Thousand 
Flag Number Gross Tons Flag Number Gross Tons 
ATCT CANS eee eee 466 2,470 Italian. G2 See 18 79 
British 235s. ee 367 1,894 Japanese 2 es 10 58 
Norwegian (= 2en2 37 195 German (eee 10 34 
Duteh +2. ees 43 126 Belgian... ease 8 37 
Fren¢h "2222227 Soe 23 a | Dannie ssn 4 36 


Twenty-six countries altogether had 1,036 bulk-oil vessels with a 
combined gross tonnage of 5,160,534 at the middle of 1923. Those of less 
than 500 tons were not included in these totals, which, however, did in- 
clude 98 sail and barge vessels of 147,050 tons. The United States with 
47.8 per cent, Great Britain with 36.7 per cent, and Norway with 3.8 per 
cent, together controlled 88.3 per cent of the world’s oil tankers which, in 
turn, made up 8 per cent of the world’s entire shipping (33,507 steam, gas, 
and sail vessels of 100 or more gross tons each and totalling 65,166,238 
tons) on June 30, 1923. During the nine preceding years the number of 
tankers had increased 188 per cent—from 366—and the gross tonnage 258 
per cent—from 1,441,196 gross tons. The Bureau of Navigation has 
taken its statistics from Lloyd’s Register, except those pertaining to the 
United States, and they all exclude Navy, Admiralty, and other Govern- 
ment tankers.t¢ 


* Wall Street Journal, October 17, 1923. 3 

+ Although tanker transport is economical it (usually) makes up about half the cost 
of California oil delivered at the North Atlantic refineries. The round voyage takes 
42 days, including 2 days for twice traversing the Canal. To cover the distance of 
10,000 miles means the burning of 1,700 tons of fuel oil, the eating of 5,000 meals 
plus night lunches, the paying of $5,000 in wages and an average of $15,000 to $20,000 
in Canal tolls —The Lamp, W. F. Dunning, December, 1922. In 1921 it cost $3,250,000 
to build the tanker “Tamiahua” of 16,340 tons deadweight or 100,000 barrels capacity, 
making $32.50 a ton. According to the Wall Street Journal the cost of building in 
American yards now averages $80 a ton, compared with British building cost of about 
$65, referring presumably to gross tons, making the cost less for a deadweight ton. 

t The Lamp of June, 1928, reports 969 tank steamers of 7,723,951 deadweight tons, 
which, at 6 barrels to the ton would make a total carrying capacity of about 46,350,000 
barrels for the world’s'tanker fleet, evidently not counting the sail ships and barges, 
but including some idle steamers. 


OILDOM: ITS TREASURES AND TRAGEDIES 91 


DISTRIBUTION AND UTILIZATION. 


Distributing and Marketing Products. Great differences exist be- 
tween the marketing agencies and conditions of the crude oil industry and 
those of the refining industry. Due largely to the relatively huge number 
of producers, 16,000 in 1919 according to the Federal Trade Commission,* 
the business of crude production is on the whole inefficient in recovery, 
uneconomic in caring for the product, and highly competitive and there- 
fore at times unprofitable in marketing. Transportation, refining and 
marketing of refined products are activities concentrated in the hands of a 
relatively small number of corporations. As a rule, the refiners market 
their own output, and the degree of concentration in refining—138 com- 
panies directly controlling 84 per cent of the refinery yield in 1919—is an 
index to the degree of concentration in the marketing of refined products. 

Because crude production has grown more rapidly than the normal in- 
dustrial development of the country, becoming a sort of free-for-all game, 
the petroleum interests have neglected it and instead, as Pogue says, 
paid unremitting attention to the means for extending the markets for 
the manufactured products. As a result of the competitive, individualistic 
methods of ‘production in vogue, harmonizing with the unrestrained wild- 
catting, there is usually present a plethora of raw material. To prevent 
a paucity in demand for all of the products and by-products, on the other 
hand, requires highly organized efforts.} 

It is interesting to note that most of the thirty-two companies that 
each produced a million barrels or more and together 58 per cent of the 
crude in 1919, were either refiners (and marketers) or were practically 
identified with them through common stockholders and thus controlled 50 
per cent of’ the refined products that year. Being engaged simultaneously 
in production and refining makes it possible for the integrated companies 
to benefit from the advance in the price of crude oil both as producers 
and refiners (as well as marketers) while those small refiners who do not 
produce crude complain that they are placed in a difficult position. 

Marketing in general is in the hands of three groups: (1) Standard 
companies, (2) independents, and (8) jobbers. The Standard group, 
which runs through their stills a little less than half of the crude refined 
each year, usually distributes two-thirds of the gasoline, buying the dif- 
ference from the independents. The independents, therefore, directly dis- 
tribute relatively less gasoline but more of other products and the crude oil 
itself. The jobbers handle practically no crude oil and fuel oil, preferring 
the more profitable and attenuated distribution of gasoline, kerosene, and 
lubricants. In the marketing of gasoline in particular, the larger in- 
dependents are aping the Standard group in perfecting systems of dis- 


*Report in response to House Resolution No. 501, ‘‘Advance in the Price of 
Petroleum Products’, pages 30-31, under “Competitive conditions in the marketing 
of crude oil’’, 1920, followed in 1921 by a report on the ‘‘Pacific Coast Petroleum In- 
dustry’’ which considers marketing and refining in the United States, pages 196-220. 
The Census Bureau gives only 9,814 producers of petroleum and natural gas in 1919, ~ 
from less than 1 to about 70,000 barrels daily for each. 


+To-day, therefore, the marketing of oil, with its preparatory steps of transporta- 
tion and refining, is found to be a closely integrated enterprise, handling tremendous 
volumes of products, through diverging and ramifying channels of distribution of a 
unique and singularly efficient character.—Pogue’s ‘‘Economics of Petroleum”, page 213. 


92 OILDOM: ITS TREASURES AND TRAGEDIES 


tribution for directly placing the refined products in the hands of con- 
sumers by means of service stations in the cities and tank wagons and 
tank stations in rural regions. The division of marketing territory among 
the Standard companies, continued since the Standard Oil dissolution in 
1911, is shown on a map in Chapter VII in outline. 

On account of the increasing competitive conditions* numerous special, 
local, regional and national organizations have sprung up during the last 
few years, largely for the purpose of stabilizing market conditions. Many 
States have their own marketers’ associations, one of the youngest being 
formed in Indiana during September, 1922: The Mid-Continent Oil and 


DISTRIBUTING STATION IN A FORMER DESERT 
Union. Oil Co.’s plant in the Imperial Valley, Calif. 


Gas Association is probably the strongest of its kind in the country but 
was not organized before October, 1917. It kad more than 2,000 members 
in March, 1923.; On February 17, 1923, nearly one hundred representa- 
tives of refiners, jobbers and marketers met at Chicago and formed the 
newest marketing “club’—the American Oil Men’s Association—merger 
of two others, the National Petroleum Marketers’ Association and the 
American Independent Petroleum Association. 
Prices of Refined Products. There should no doubt be a definite rela- 
tionship between the price of a crude oil and the prices of its various 
products.t This seems all the more reasonable in view of the unique fact ~ 
that ordinarily the manufacturing consumer of the raw material (crude 
oil) fixes the price of that material.|| This is certainly a saving influence 


*Mor “Factors in Cost of Marketing’’, see page 16, The Oil and Gas Journal, May 
3, 1923. For ‘Investment in Marketing Equipment’’, see Chapter XII hereof. 


yOfficers, 1921-1924: W. N. Davis, pres., W. B. Pyron and Chas. T. Wilson, v. 
presidents, H. H. Smith, sec.-treas. This influential body is credited with getting the 
following favorable report from the Federal Trade Commission: “It seems that there 
is a greater justification in assigning the advance in price of crude oil and petroleum 
products to varying conditions of supply and demand in the light of emphasized and 
pessimistic statements as to future of supply than to a combination in restraint of 
trade.’’—Oil Trade Journal, March, 1928. 


tC. M. Alexander, Gen. Mngr. Texas Oil Products Co., in The Oil and Gas Jour- 
nal, Oct. 11, 1923. 


|| Oil, Paint and Drug Reporter, May 7, 1923, page 17. 


OILDOM: ITS TREASURES AND TRAGEDIES 93 


in the industry, especially when it is possible to discourage over-produc- 
tion and waste through the cutting of prices from above. While the gen- 
eral trend of crude and of refined prices do not diverge greatly from that 
of all commodities from year to year, there are these two differences to 
be noted between the first two: (1) crude oil presents a much greater 
percentage range in price than do the refined products taken together, 
and (2) the prices of the products being apparently more stable they lag 
a little behind those of the crudes when the latter go either up or down. 

For purpose of comparison the prices of Oklahoma oils, crude and re- 
fined, are herewith given according to The Oil and Gas Journal of October 
18, 1923 (wholesale or refinery prices during.a period of depression) : 


Gal. Refincd Oi! Bbl. Cts. 
Grade of Crude Oil Bbl. Cts. Fuel, 0) eee $0.85 2 
Healdton, below 28° __.. $0.50 ta RoAgwolle GO ga are as 1.05 2.5 
es OO RUOR OO esate: 70 1.7 Kerosene dist. 44° _-____ 2.10 5 
Mid-con. below 33°_____ 90 a1. EES cea io 2 Raa vas ee ia ae 3.36 8 
os soo MLO eoo.0o. 1.30 3.1 Lube 200 vis. 23-28 cold 
uf 40° and above io 4.2 LOSU a tab ee ee es 6.30 15 


Consumption.* The U. S. Geological Survey publishes monthly sta- 
tistics that indicate quantity of crude oil delivered to consumers 
by the pipe line and other marketing companies. These deliveries do not 
necessarily mean immediate consumption as considerable stocks must be 
carried by refiners and other consumers. Three classes of consumers of 
crude should be comprised within complete statistics of ‘‘Consumption.”’ 
The most important factor is the refinery; next is the group using 
petroleum in its natural state for fuel purposes; and third is the export 
factor. The first and third are determinable with a fair degree of 
accuracy; the second is still definitely uncertain, but usually makes about 
one-fifth of the domestic production of crude oil.f The following analysis 
shows how the indicated deliveries of crude oil during September, 1923, 
were determined: 


Million Bbls. 


Stocks of domestic and imported crude, Aug. 31, 1923__.______ LGR IAS TE 298.9 
Pomesticuproduction. during September. 222s 222s a ee 64.3 
Imports during September (mainly from Mexico)_-_-_-__~_-___=_.______ 6.0 
NoLaresupply. avellaple: tor. demand =.) ses eee ee ae 369.2 
Exports of crude during September_-____---_____-_-__.. 1.6 mil. bbls. 
Stocks of dom. and imp. crude September 80_______~_ 3807.2 mil. bbls. 308.8 
Difference—Indicated deliveries during September______-~_________ 60.4: 
AVerrrean dally rate: Ofmndidaled > déliverlessm 3.22 a es Ee 2.0 


*“TIn the consideration of any domestic industry the factor of home consumption 
must not be overlooked; indeed, home consumption is. more directly connected with 
national welfare than exports.’’—George Otis Smith’s “The Economic Limits to 
Domestic Independence in Minerals’? in Mineral Resources of the United States, 1917. 


7 Report of the Federal Trade Commission on ‘The Advance in Price of Petroleum 
Products,” 1920, page 26. 


94 OILDOM: ITS TREASURES AND TRAGEDIES 


CONSUMPTION OF CRUDE OIL IN THE UNITED STATES BY 
MONTHS FOR 1923 


(Expressed in thousands of barrels) 


Daily Daily 

Month Total Average Month Total Average 

JaRNaT yas eee 58,448 1,885.4 J tly ee ee 61,192 1,973.9 
Pebruery (22 242—= 51,522 1,840.1 AUS UStHt oes Sates _ 62,447 2,014.4 
Marreh 22 en le er eee 59,849 1,929.3 September’ 22222622 ~ 60,447 2,014.9 
April ise Soo ae eee 57,350 1,911.7 October: 2222 _ 63,412 2,045.5 
May ice eee ee 58,020 1,871.6 Novel Deny o.0= gee 61,204 2,040.1 
Junes a Sees ease 54,396 1,818.2 December 28) =a See 
First 6 months___ 339,545 1,878.6 Second 6 months____ 868,555 2,005.0 

' Partly estimated for the entire 12 months of 1923__-___-_______ 708,100 1,940.0 


Production gained slightly over consumption during September, 
bringing the stocks of crude oil in this country up to the highest figure 
in history, namely 307.2 million barrels. This quantity is additional to 
that held on leases and at refineries. The recent gain in consumption is 
almost marvelous—81 million barrels or 31.3 per cent, comparing the 
first half of 1923 with that of 1920. It was 117.4 million barrels or 45 
per cent greater during the second half of 1923 than during the first 
half of 1920, based in part on an estimate for the last month of 1923. 


CORRELATION OF MARKETED PRODUCTION WITH CONSUMPTION 
OF DOMESTIC CRUDE OIL 


(Millions of barrels) 


Pro- Consump- Pro- Consump- 
Year duction tion Year duction tion. 

LOU O ices Shee eae eel 209.6 229.5 LONG rie So OR ater cetien aaa SoD S51ie 
yh 5 BS ppc ae a eet ae wah a 220.4 214.2 eA 8  Rs Ugeeeeeee  Peeie c aeee RR AS 1 355.9 380.2 
AOD 35 ter eer) tae ee eee 222.9 231.3 T9195 8a late ene Spleeeaee Hee 378.4 371.6 
LOLS iss eee eee 248.4 248.5. LODO Re Sie S Reach eos renee aie 442.9 429.6* 
TODA es ee ee Boe ae ee 265.8 247.0 1921 SS Pe ee 472.2 406.8* 
DOUG oe ea ee ee ee 281.1 258.9 1920) 6.5 eae 5dt.D 592.4 
NOL G RIS eek Ses ras A ee 300.8 302.1 1923 SRI AE OE See (ey) 708.1* 


Utilization.—Petroleum is used chiefly as a source of power, light, 
and lubricants, and these are the uses that everyone knows. Crude pe- 
troleum is used in decreasing quantities from year to year; and more and 
more of. it is prepared for higher utilization by breaking it up into refined 
products of greater value. The light-gravity ethereal products are em- 
ployed as local anesthetics. The gasolines are the universal fuels of inter- 
nal combustion engines. The naphthas are extensively used as solvents 
and are blended with raw casing-head gasoline to make commercial gaso- 
line. The kerosenes, though used chiefly for illumination, are employed 
increasingly as fuel for farm tractors. The lubricating oils and greases 
are indispensable to the operation of all kinds of machinery. The waxes 
derived from petroleum of paraffin base are utilized in many forms—as 
preservatives, as sources of illumination, and as constituents of surgical 
dressings made for the treatment of burns. Petroleum coke, an almost 
pure carbon, is used in metallurgy and in making battery carbons and 
arc-light pencils. By-product fuel oils obtained from refining are used 
for generating power by industrial plants, railroads, and ocean steamers. 
Road oils lay the dust on streets and highways, and artificial asphalt, a 
product of petroleum, has been used in some places for paving.+ 


*Exports of domestic crude oil are not included in the indicated consumption. 
7 Page 17, “World Atlas of Commercial Geology,’ Part I, U. S. Geol. Survey, 1921 


OILDOM: LIs TREASURES AND TRAGEDIES 95 


There is a general agreement that lubrication is the most important 
sand most irreplaceable application of all petroleum products. One is 
justified, therefore, in placing this requirement at the head of an economic 
priority list, as follows: 


1. Lubrication 5. Gas manufacture 9. Merchant marine 
2. Illumination 6. Gasoline manufacture 10. Locomotive firing 
3. Chemical byproducts 7. Diesel engines 11. Steam-power plants 
4, Automotive engines 8. Naval vessels 12. Heating buildings* 


OUR NAVY NEEDS A LARGE RESERVE OF OIL 

Naval vessels should be fueled and oiled ahead of the merchant marine, railways, 
steam-power plants, and domestic heaters. The U. S. Navy plans to store 50,000,000 
bbls. of oil at a cost of $103,000,000, payable in oil from naval reserves. (Wall St. 
Journal, Nov. 1, 1923.) 


MAKING THE IGLOO COM- 
FORTABLE WITH KER- 
OSENE 


A truthful picture of what may 
be seen along the Alaskan Coast 
and on the banks of the lower 
Yukon. The Eskimo’s brace has 
displaced his bone drill and the 
rifle his harpoon. (Standard Oil 
Bulletin, 1917.) 


*Abstracted from article by R. S. McBride in Hngineering and Mining Journal, 
Oct. 30, 1920. Pogue says, in his “Economics of Petroleum,”’ page 348: In addition 
to the fact that millions of barrels of potential lubricating oils are burned annually 
in the form of fuel oil, the application of lubricating oils is in many instances far from 
scientific. Losses arising from faulty or imperfect lubrication run from 10 to 50 per 
cent of the power consumed. . . . The life of lubricants has been lessened through 
crank-ease dilution. 


6 OILDOM: ITS TREASURES AND TRAGEDIES 


AN OIL-BURNING LOCOMOTIVE IN SOUTHERN CALIFORNIA 


About 36 years ago oil was thus used for the first time, being introduced on 
California railways by Messrs. Hardison and Stewart when crude oil cost $2.50 a 
barrel and coal $22.00. (Union Oil Co. Bull., Oct., 1922.) American railways now 
burn 27 per cent of the coal and 8 per cent of the oil produced in the United 
States. It would be an economic crime for them to consume more fuel oil where 
coal is available. 


ARTIFICIAL AND NATIVE ASPHALTS ARE USED IN ROAD-BUILDING 


The former represents the residuum in refining oils with asphalt base; the 
latter comes chiefly from Trinidad and California... Imported Mexican petroleum 
is the source of 60. per cent of our refinery asphalts. (Standard Oil Bulletin.) 


OILDOM: ITS TREASURES AND TRAGEDIES 97 


What we need now is better and not faster utilization of petroleum. 
It is greatly to be regretted that in some parts of our country, particu- 
larly in the Southwest, from Texas to California, the last three uses above 
enumerated prevail to the almost entire exclusion of coal. The growing 
use of fuel oil for heating buildings in the East is directly due to the 
recent labor troubles in the anthracite industry. The principal railroads 
of the United States consumed practically 45 million barrels of fuel oil 
in 1922, an increase of 4 million barrels in one year. Steam-power and 
other plants producing electric power utilized in 1922 13.2 million bar- 
rels of fuel oil besides 27,172 million cubic feet of natural gas. There 
is absolutely no excuse for burning unrefined oil when fuel oil may be 
obtained at 60 per cent of the price of the crude according to 1922 con- 
tracts of the Santa Fe and other railway companies that buy liquid fuel 
from the Mid-Continent refineries. It is interesting to note that 440 
million barrels, or ten times the present rate of consumption, would be 
required by the railways if all our locomotives burned oil. During 1922 
-about 52 million barrels of fuel oil were delivered for ships’ bunkers at 
ports and insular possessions of the United States, an increase of 9 mil- 
lions or nearly 21 per cent in one year. The U.S. Navy took 5.8 million 
barrels, making a total of 57.8 million barrels, for marine and naval pur- 
poses. Of this total 60 per cent was of Mexican origin, 


COAL VERSUS OIL 


Coal the Chief Rival of Petroleum. The coal and petroleum indus- 
tries are closely interrelated. Coal and petroleum are largely interchange- 
able as sources of energy. Both can be used in their crude state for fuel 
under boilers, although crude oil is the more efficient; both provide an 
iluminating oil for use in lamps, although kerosene is so much better 
than coal oil as to have driven it out of the market; both furnish a satis- 
factory fuel for the internal-combustion engine, although benzol, a coal 
derivative, has not yet been recovered in sufficient quantities to make it 
a competitor of gasoline; both provide a fuel gas, although that derived 


Steaming Storage Evaporation Heat Value Freight 


- Deterioration 
Labor Boiler Capacity and Ash Combustion Efficiency 


a 


BOILER EFFICIENCY 
COAL 74% 


GRAPHIC COMPARISON OF THE EFFICIENCY OF COAL AND 
OIL AS FUEL; AFTER TIDE WATER OIL CO.* 


* Reprinted by permission from Pogue’s ‘“‘Economics of Petroleum,” published by 
John Wiley and Sons, Inc. 


98 OILDOM: ITS TREASURES AND TRAGEDIES 


from petroleum has the greater heat value. Ton for ton, petroleum has 
every advantage over coal, and there is every reason why it should drive 
coal out of its present preeminent position in industry, except one—the 
limitations of the supply. Not only in terms of money, but in terms of 
human effort and life, is the liquid fuel far cheaper to produce.* As a 
matter of fact, however, petroleum cannot be expected radically to dis- 
place coal in industry and transportation, since a crude petroleum produc- 
tion of about 3,000 million barrels a year would be required to drive coal 
from its ascendency.+ That quantity is four times the enormous yield 
from all the 300,000 live oil wells in the United States during the year 
1923. 


HOUSEHOLD HEAT- 
ING WITH OIL 


Low-priced Kerosene 
or furnace (not fuel) 
oil is used in this par- 
ticular type of oil 
‘burner. At 10 cents a 
gallon, 120 gallons cost 
less than the equiv- 
alent ton of coal at $16. 
Moreover, an oil burner 
is without smell, smoke, 
dust and ashes; _ it 
heats evenly without 
attention; but it costs 
from $200 to $3850 in- 
cluding installation.¢ 

Three things distin- 


guish the domestic from 
the commercial type of 


Te Saal) Pine burner ; Automatic start 
\-Throttle Valve = Trees and stop; automatic ig- 
2-Regulator or Needle Valve nition, and safety de- 
3-Trip Bucket vices for stopping the 


4: Trip Bucket Valve feed if ignition fails. 


5 Overflow Pipe 


Displacement of Coal During 1923. As a result largely of labor 
troubles in the coal fields of Missouri, Kansas, Arkansas and Oklahoma, 
and of over-production in the oil fields west of the Mississippi, almost 
10,000,000 tons of coal were displaced by oil or gas in the mid-continent 
region alone during the year just ended. More than a million tons was 
displaced by oil in public utilities alone in the four States named. In 
Kansas City half a million tons is now eliminated by gas, which also has 
displaced 11% million tons in Arkansas and Texas. High costs and un- 
certainty of supplies have induced these railways to change from coal to 
oil: the Rock Island, the ’Frisco, the Cotton Belt, the M.-K.-T., the Santa 
Fe and the Missouri Pacific.|| 


*“The Coming of Coal,’ p. 88. This excellent book of 1138 pages was prepared by 
Robert W. Bruere for the Educational Committee of the Commission on the Church 
and Social Service of the Federal Council of the Churches of Christ in America, 
Association Press, 347 Madison Ave., New-York. 


+ Pogue’s “Economics of Petroleum,” p. 330. 


+ (Quinn burner) Better Honies Equipment Co., Baitimore and Washington. An- 
other type has been designed by EH. B. Ericksen, 142 Clifton Place, Brooklyn. 


|| In the San Francisco Chronicle, Aug. 30, 1928, G. E. Laughery, financial editor, 
wrote that New England has altogether (in very recent years) supplanted 25,000,000 
tons of coal annually with oil. Read ‘‘Hastening the Downfall of King Coal’ in the 
Literary Digest, Sept. 8, 1923. According to The Oil Weekly, Dec. 22, 1923, the con- 
version of the Tex.-Okla. division of the Rock Island alone will require % of a million 
barrels of oil yearly. 


OILDOM: ITS TREASURES AND TRAGEDIES 99 


Heating Buildings. Although this use is the last to be recommended 
according to the priority list on a preceding page, the tendency of 1922 
has continued throughout 1923 in the way of introducing oil burners for 
the heating of buildings. Notwithstanding the approval of insurance com- 
panies, the New York city authorities have discouraged, however, ihe 
storage of as much as 50 gallons of distillates, such as low grade kerosene, 
in the basements where coal furnaces have been converted to oil burning. 
Such objection will no doubt be overcome by using heavier or less volatile 
fuel oil. No prejudice exists for instance in Kansas City where more than 
15,000 oil burners have been installed in apartments and residences.* 


AMALGAMATING COAL AND OIL 
BENEFITS THE OIL BUSINESS 


Advantages to the oil industry of the 
processing of oil combined with coal: (1) 
Heavy cheap oils, on account of their high 
pitch content, become more useful for mak- 
ing coke than the light expensive oils; (2) 
the residues after distilling light oils can 
be more efficiently utilized for making mix- 
tures for the production of gas, motor fuel, 
and coke, than for direct combustion. A 
ton of oil will collect all the combustible 
from 5 tons of low-grade coal and. make 
5 tons of concentrated solid fuel.—Millions 
of tons of oils with too much associated 
water exist in many oil fields and are sal- 
able only to combine with coal (Walter E. 
Trent’s “The Fuel Problem of the United 
States,” in the National Magazine, Nov. 
£923)2 

The Trent process consists in stirring to- 
gether water, oil and powdered coal. This 
yields a partly de-ashed* plastic fuel, called 
an amalgam, the oil selecting the coal parti- 
cles and largely excluding the water and 
ash. The amalgam is mechanically freed 
from water in the same way that butter is 
worked. It can be fed to the furnace by 
shoveling or by forcing through pipes; and 
if desired, it can be safely stored under 
water. (O. F. Hood, chief mech. engr., 
Bureau of Mines, “The Use of Oil in Clean- 
ing Coal,’ Chemical and Metallurgical En- 
gineering, Aug. 3, 1921). 


Co-operation of the Coal and Oil Industries. Both profit and 
popularity will come to the producers of coal and of oil alike if the waste 
material of the one and the salt-water and oil emulsions of the other can 
be cleansed and combined to form marketable products that can be sold 
for domestic purposes in particular at prices noticeably lower than those of 
anthracite or of the superior grades of bituminous coals. Even better 
would it be if coke instead of raw coal and unrefined oj] were used in this 


*The two preceding paragraphs are based mostly on data r 

defunct U. S. Coal Commission. In The Saturday Movaiad Post, Ort. 14 1922) wo 
W. Parsons wrote as follows on the subject of “Coal Remedies” : Oil for heatin 

homes, factories and other buildings is not in the experimental stage, for some of the 
great sky-scrapers, hospitals and department stores, as well as homes in New York and 
other cities, have long ago gone over to an oil diet and dispensed with their coal bins 
The. Oil and Gas Journal, August 23, 1923, stated that the Saving to the Ritz-Carlt n 
Hotel during six months after conversion amounted to $25,490: and that the New Y st 
prices at. the middle of 1923 ranged from 4% cents a gallon for heavy Mexican oil tor 


use in big buildings, to 9 or 10 cents a gallon for refi i ; ; 
smaller furnaces, . refined (burning) oils for use in 


100 OILDOM: ITS TREASURES AND TRAGEDIES 


way, for then the dyes, the benzol, the ammonia, and the gas for cooking 
would not be lost. It looks now as if solutions to their conservation and 
cost problems have been worked out to apply on a commercial scale. .One 
of the practical solutions is illustrated herewith.* 


WASTE, CONSERVATION, AND MONOPOLIES 


Tragic Waste of Petroleum. The heaviest losses of the natural re- 
sources are sustained underground as a result of the destructive competi- 
tive drilling and the ineffective methods of production. But the losses 
due to inadequate methods of handling the product upon reaching the 
surface are far more sensational because they can be seen. Surface © 
losses are greatest in new fields and arise from forcing production before 
handling and storing facilities are ready. Thus some of the oil escapes 
eapture, sinking into the soil or flowing down streams; great quantities 
of the more valuable parts evaporate into the air;+ while fires are blamed 


ECONOMIC TRAGEDY ECONOMIC TREASURE 


A great deal of good gas was wasted when a'well of the Union Oil Co. 
of Calif. blew up at Santa Fe Springs in 1923. Note the material built up 
around this gas crater. In many fields away from population centers natural. 
gas escapes into the air. In some places it is made the source of carbon black, 
as in the great Monroe gas field, Louisiana. In the view at the right appears - 
part of a plant at Santa Fe Springs for extracting the gasoline content before 
the. gas is burned. (See following chapter and Mining and Oil Bulletin, Dec., 
1922.) 


for wastes unmeasurable but immense. Also, enormous volumes of nat- 
ural gas accompanying the oil are allowed to escape in the absence of an 
adequate demand for this product. 


Losses of oil occur not only in producing but in storing, transporting 
and refining the raw product. In some cases 20 per cent of the gasoline 
content evaporates in storage. Despite the high efficiency of pipe-line 
transport it is estimated that 2 per cent.of the oil is lost in trunk and 
gathering lines through leakage and evaporation. Tank cars not insulated 


* Another solution may be the one described by Lindon W. Bates i ion 

Petroleum News, August 16, 1922. v AS aes peli 
“On page 63 appears a comparison of the coal:and oil industries as to total value 
ae vee ee re vA peel Geitae the aioe: study’ of coal and oil will be the 
subjeet of a iorthcoming book under the major authorship of President Fra : 
McVey of the University of Kentucky. : aoe 

pas The Bureau of Mines states that the entirely preventive losses in the evaporatien 
% tg ar from cee Posner on the time it leaves the wells until it arrives 
at .tne refineries totals. yearly more than 300 million gallons, or enough to su 
1,250,000 autos at 250 gallons a year. % sae 


OILDOM: ITS TREASURES AND TRAGEDIES 101 


lose gasoline in summer time at the rate of 1 per cent per day. Of the 
customary 4 per cent waste in refining about half, in the form of gasoline 
vapor, could be saved. The greatest waste above ground, however, takes 
place in the utilization of gasoline, fuel oil and lubricants. Thirty per 
cent of the heat units in the gasoline goes into the exhaust of the average 
automobile (see Chapter VII). According to the Bureau of Mines,* 
25 per cent of the fuel oil consumed for steam-raising is wasted through 
improper operation of plant. The most criminal economic waste, next to 
the underground losses, lies in allowing any oil with a lubricating element 
to be burned before refining. 


Conservation. If the sub-surface products of the earth’s development 
through vast periods of time should be exhausted, whether by waste or 
by use, civilization would fall back upon material bases little better than 
mankind had in the Stone Age.t It cannot be pointed out too often that 
while in a century the unequalled growth in the industrial and transport 
demands of our country has resulted in the exhaustion of hardly 1 per 
cent of its coal resources, in the 64 years since the Drake well was drilled 


RIGHT and WRONG USE of NATURAL GAS 


Bureau of Standards, Department of Commerce, Washington, D.C 


WHILE OUR LIQUID FUEL 
SUPPLY IS MORE LIMITED 
THAN COAL, NATURAL GAS 
IS MUCH LESS ABUNDANT 
AND SHOULD BE _ CON- 
SERVED 


This shows a practical demon- 
stration of the Bureau of Stand- 
ards in saving this fluid. See 
also Natural Gas Manual for the 
Home, Tech. Paper 325, Bureau 
of Mines, 1922. Price 10 cents. 
Sold by the Supt. of Documents, 
Washington, D. C. 


WRONG CORRECT 
Odors — Porsonous Fumes —Woste of Gzs Good Service with Lew Pressures 
ld Best Mets tea 2 EAL 


apparently 40 per cent of the available oil has been brought to the surface 
and consumed; and the rate of America’s development is still accelera- 
ting.t “Yet with all the optimism that can be justified I would urge a 
policy of saving as to petroleum that should be rigid in the extreme. If 
we are long to enjoy the benefits of the petroleum age, which we must 
frankly admit fits into the comfort-loving and the speed-loving side of 
the American nature, we must save the oil. We must save it before it 
leaves the well; keep it from being lost, keep it from being flooded out, 
driven away be water. * * * We must save the oil after it leaves the well, 
save it from draining off and sinking into the soil, save it from leaking 
away at pipe joints, save it from the wastes of imperfect storage!” 


*J. M. Wadsworth’s “Efficiency in the Use of Fuel Oil, ” October, 1918. 
j Editorial in Texaco Star, April, 1914. 
¢ George Otis Smith in Mining and Oil Bulletin, Los Angeles, January, 1920. 


|| Franklin K, Lane in “Conservation through Engineering,” Bulletin (1 eS 
Geological Survey, 1920. 


102 OILDOM: ITS TREASURES AND TRAGEDIES 


The late Secretary Lane’s earnest appeal seemed well on the way 
to be answered favorably by the established operators until two years 
ago when a legion of interlopers began an orgy of wildcatting and over- 
production that in the end will benefit nobody and in the meantime has 
crippled the spirit of conservation. In no other branch of the American 
mineral industry is a policy of conservation so imperative as in petroleum, 
more treasured than gold! How, then, may the life of this golden liquid 
be prolonged for posterity? Space here permits mere mention of some 
practical steps that may be taken: 

(1) Reduce the number of unnecessary automobiles; (2) stop over- 
development—by pooling of interests, otherwise by legal restriction; (3) 
refuse to sell oil for utilization without refining it; (4) store oil under- 
ground through cooperation of producers, thus avoiding vast loss through 
leakage and evaporation; (5) develop substitutes for part of the gasoline 
used as motor fuel, the growing demands for which has set the galloping 
pace for crude oil production; (6) in order to fill prior demands for Diesel 
engines, naval vessels, and the merchant marine; develop hydro-electric 
power*, and failing that fall back on coal if it is available and not too 
costly, even in the oil fields themselves or wherever liquid fuel is lavishly 
burned for power purposes; (7) adopt priority rules to get higher 
utilization of petroleum, and in connection therewith favor the use of 
coal and its products wherever these will serve the same purpose; (8) 
increase the recovery of the natural resource by artificial methods already 
mentioned, and in abandoned shallow fields begin the mining of oil sands 
as soon as the prices of crude oil justify such a step; (9) discourage the 
cracking process wherever applied to crude oil having a lubricating com- 
ponent, for the increased gasoline recovery is gained at the expense of 
the latter, for which there is now no sufficient substitute; (10) educate 
the consumers not to waste any petroleum product that can be used over 
again, such as lubricating oilt even if it is temporarily contaminated or 
diluted; and (11) encourage our nationals in their discovery and develop 
ment of foreign fields. . 

Monopolies. Since the dissolution of the Standard Oil trust in 1911, 
there cannot be said to exist any general or lateral monopoly in the 
American oil business such as is found in Dutch East India and other 
foreign regions.t The growth of the so-called independents, the oldest 
important ones of which began work with the Beaumont discovery by 
Captain Lucas in 1901, has been so rapid as to prevent any extensive or 
geographic control of crude oil production. What practical monopolies 


*The best course for the power industry is the use of natural water-power sources, 
as far as practical, for the purpose of saving human energy, coal, oil and other re- 
sources. Electric power is an aid to the production of raw material, to transportation, 
manufacture and utilization of the products of industry. Frank G. Baum of San 
Francisco quoted in the New York Tribune, September, 1923. The building of the 
Glen Canyon dam at Lee’s Ferry on the Colorado will result in the reduction in fuel 
oil ae ee of about 90 million barrels yearly. Scientific American, April, 1922, 
page “ 

tRead “The Regeneration of Used Lubricating Oil,” Scientific American Monthly, 
March, 1920, page 196. 

tIt is apparent, from the vagaries of its price performances this year, especially 
in the crude oil section, that the industry lacks even the control essential to stabiliza- 
tion. How otherwise can one account for such events as the advancing of crude oil 
prices in the early days of 1923, when production was running wild; stocks were 
already of enormous proportions, and consumption was at its lowest ebb ?—Hditorial, 
Oil, Paint &€ Drug Reporter, May 28, 1923. 


OILDOM: ITS TREASURES AND TRAGEDIES 103 


are known to exist are of two kinds: (1) Local or regional in regard to 
pipe-line transportation; and (2) natural or vertical in so far as one organ- 
ization may control all the related economic functions of production, 
transportation, refining and distribution and thus permit its products to 
stay in its own hands all the way from the well to the market.* 

The decline in control of the refining industry is evidenced in a brief 
submitted to the Federal Trade Commission by R. L. Welch, secretary 
of the American Petroleum Institute, who declared that the ‘‘Standard”’ 
group in 1911 refined 80 per cent of the gasoline produced in the United 
States; in 1915, 60 per cent; and in 1919, only 49 per cent. From the 
table below it appears that this group, at the close of May, 1923, was 
refining only 45 per cent and was producing only 25 per cent of the crude 
oil of the United States. 


PARTICIPATION OF THE STANDARD OIL GROUP IN THE 
AMERICAN PETROLEUM INDUSTRY ABOUT THE 
MIDDLE OF 1923+ 


Per Cent Stocks at the close of May 31, 1923: 


€ride oil produceds_=— 2 25 Per Cent 
@rideaa trenned a te 45 Crude oil, 164.7 million bbls.___---- 58.5 
PerWretimen ie. no es eke oe 40 Gasoline, 648.3 million gals.___----~- 75.7 
DOMestiCemMarkets22 2.25 2. Ss 5d Kerosene, 729.5 million gals._____-_-~ 72.0 
Tie a hy Co ca ae ee eee 75 Gas & fuel oil, 736.6 million gals.___~ 55.7 
Pipewiue ownersnip. oul = 2 60 FAUPICHHCN Be eee ee Soe Sek (f 


As a result of the recent findings of the Senate oil investigation com- 
mittee, eight recommendations were made to curb the alleged evils: (1) 
Establishing a uniform system of accounting * * * so that the reason- 
ableness of prices for petroleum products can be found on a cost basis; 
(2) starting a compulsory system of reports to the government showing 
the operations of each oil company engaged in interstate commerce; (3) 
making pipe lines real ‘common carriers” through divorcing their owner- 
ship from the oil transported, etc.; (4) revising (railway?) freight rates 
on products so Mid-Continent refiners may again market their output 
through Michigan, Indiana, Ohio, Pennsylvania and the New England 
states; (5) prohibiting or regulating the exportation of petroleum and 
its products for which there is pressing demand in the United States; 
(6) starting grand jury proceedings wherever price manipulation is at- 
tempted; (7) investigating “implied” or expressed agreements to fix prices 
arbitrarily or to restrain trade, and, if warranted, citing parties to the 
agreement for contempt of court; and (8) inquiring into all claims for 


*In a fundamental economic sense the petroleum industry is highly integrated— 
an activity expected from a purely physical standpoint to function with maximum 
efficiency as a natural monopoly. The tendency toward financial unity in keeping 
with the underlying economic structure was effectively shown during the earlier 
decades of the development culminating in a country-wide organization, the Standard 
Oil Co. of N. J.—Pogue’s ‘‘Economics of P.,” page 3. 


7 According to The Financial World, published by the Guenther Publishing Co., 
53 Park Place, New York, N. Y., who early each year issue a very good review of the 
oil industry in pamphlet form for $1.00. 
4 In 1921 the Royal Dutch-Shell group had almost 33 per cent of the crude production 
in all countries other than the United States.. This control included practically all the 
yield in Venezuela, Egypt, and British Borneo, 97 per cent in Dutch East India, 29 per 
cent in Rumania, and over 26 per cent in Mexico, while the proportion obtained in 
Trinidad was about 16 per cent.—Foreign Ownership in the Petroleum Industry”, 
U. S. Federal Trade Commission, Febr. 12, 1923, page 17. 


104 OILDOM: ITS TREASURES AND TRAGEDIES 


basic patents on pressure still processes used in the production of 
gasoline. 


According to the Financial Review of August 12, 1923, the particularly 
novel evidence brought forth by the La Follette examination was that 
refiners evidently think they are justified in shouldering all their expense 
upon gasoline production alone. The head of. the American Petroleum 
Institute has put himself on record that refiners as a whole have operated 
at a loss since 1920. 


Such disclosures are sharpening the public taste for mining rather 
than for oil shares. The Standard Daily Trade Service of March 12, 1928, 
says: It will be the wasting away of natural resources rather than “manip- 
ulation” that will slowly carry prices up to a point endangering the pros- 
perity both of the petroleum and the automotive industries. 


It must be admitted, despite minor disadvantages,-that mergers and 
monopolies as a rule make for conservation and make it possible not only 
to reduce costs of production, refining and marketing, but also to stabilize 
prices even if these are not materially lowered at any one time. It is 
decidedly better for the ultimate consumer to pay a fair and fixed price 
for gasoline and other petroleum products than to be subjected to the 
uncertainties of sudden fluctuations. Abnormal price depressions, such as 
the one experienced in 19238, cannot but encourage continued waste of a 
fuel supply that is far more limited than even anthracite. 


REVIEW OF TRAGIC ’23 


The Statistical Story. Two outstanding economic events were the 
gasoline war with its disastrous effects and the attainment of the peak or 
high point in production on the part of so many large pools within one 
calendar year. It is beyond belief that the true prosperity of the American 
oil industry will ever be threatened by the recurrence of two such related 
events. Practically all past achievements in petroleum were set aside in 1923. 
Following are the rounded figures for the more important records reached 
in the year just closed compared with those of 1922, itself a year of eco- 
nomic eclipses: 


Point of Comparison 1922 1923  % Incr: 
No. of fields surpassing 100,000 bbls. daily (peak) -___- 1 Sor 00 
Rotal numbers of cackiveollecw ells ee eee eee 285,000 300,000 5.3 
Avetage. daily yield per--wellj bbls.c-2-. 2. -ssee 2525 2 5.3 6.7 25 


Million Bbls. : 
Average: daily=vield. of all wells22.22 2S ety 2 31 


Total production of all wells —__-_-~_ ae 557.5 735 Sie 
Total imports (nearly all Mexican crude) ~ (decrease) — UPA GS 80 (37)- 
Tetal new.supply..of-allcrudé-oils 22 = SS ee 684.8 S1O> aslo. 
Tank-farm and pipe-line stocks, January 1_---.---_-~ 191 265 38.7 
Total old and new supplies for Vea Tse a eee oe 875.8 1,075 22.8 
Exports (838 to 85 ee ay ere Vad tire reo beer oe 68 94 38 
A t nsum n (after allowin or change in 

aaa Ra eeavertee So Righetti Bir i) oh Mapes 592.4 . 08 19.5 
Per capita consumption of crude__---------~---------- 5.4 6.3 14 


APPROXIMATE STATUS OF STOCKS IN THE UNITED STATES AS 
OF JANUARY 1, 1924. 


Nature of Stock Million Bbls. Nature of Stock Million Bbls. 


Gasoline. 20 3 20s pret 2 es ee DIB: Crude oil, all except on leases-__ 350 
AC retined :ols = ee [5 ? Totaleot allt oles ea aes 460 ? 


Semi-retined sols so ee 35 ? 


OILDOM: ITS TREASURES AND TRAGEDIES 105 


As shown in the following chapter, gasoline stocks attained the tre- 
mendous peak of 31,800,000 barrels on April 30, 1923. Production reached 
its peak or “top-notch” in July with a daily yield of 2,300,000 barrels. It 
is to be noted that these are maxima, not for 1923 alone, but for the entire 
life of the American petroleum industry. The most popular change was 
the drop in prices;* in regard to gasoline probably 30 to 85 per cent on 
the average and fully 50 per cent in extreme cases where the gasoline 
“war” was carried on. On the other hand, costs to a majority of the pro- 
ducers must have climbed, although they fell in a few places where the 
average daily yield per well ran into hundreds of barrels, as at Long 
Beach and Santa Fe Springs near Los Angeles. But even here the costs 
went up as the wells went down; and now, as fast as the newer and deeper 
wells cease to flow and are put on the pump, the lifting charges will take 
a jump. Data on well depths are not complete, but it may be safely said 
that the weighted average depth of production in the United States is 
now not less than 3,000 feet compared with an estimated average of 2,800 
feet for 1922. + 


A Tragic Time in Oildom. To the ultimate consumers of petroleum 
products, motorists in particular, the major part of 1923 apparently teemed 
with treasure, for at one time they were able to get gasoline for as little 
as 6 or 7 cents a gallon in Los Angeles. Also, to these and others outside 
of the producing industry who observed the feverish drilling, the increasing 
output, the stampede to build storage and to rush the oil away from the 
flowing wells by pipe line, rail and sail, the industry may have seemed 
supremely prosperous. But to many inexperienced interlopers, to the great 
majority of established producers, and to some refiners and marketers, 
the year will long be remembered as truly tragic in a financial. way be- 
cause of price-cutting, high cost of storage construction, clogging of trans- 
port lines on land, ete. Tragedies, furthermore, took form in fires and 
explosions causing loss of life and liquid, in local ruination of underground 
resources, and in waste of labor and capital through wrong wild catting.t 


Lessons To Be Learned. Since it applies with equal force today, a 
summary published over three years ago by H. G. James in The Oil and 
Gas Journal is reproduced here for the information of sincere American 
citizens. 


“If the agitation of the past months results in teaching the gasoline 
consumer economy, stops him in his mad career of money spending in joy 
rides, etc.; if it points the refiner his way to greater conservation of the 


*The “Commerce Yearbook” of the United States Department of Commerce (60 
cents, Supt. of Documents), gives average prices of crude and refined petroleum from 
1913 to April, 1923, in connection with an 18-page review of the oil industry in 1922. 

+ The record for extreme depth of a single producer is held by the General Pe- 
troleum Co.’s Clock No. 1, at Long Beach, 5,959 feet, finished in 1923. About 10 miles 
away, in the Torrance-Redondo field, a world record for rapid drilling was made late 
in. November. In the Black Diamond No. 1 well, 662 feet of hole were made and 
560 feet of 151%4-inch casing were set during 16 hours working time, according to 
The Oil and Gas Journal, December 6, 1923. ‘The great geographic changes in the 
oil industry will be taken up in Chapter VIII; the financial events in Chapter XII. 

+ “Oil Industry Sick, in Danger of Price Rise,” Washington Herald, Nov. 27, 19238, 
in which BE. J. Clapp quotes Pres. W. 8S. Farish of the Humble Oil Co.: ‘‘Marking up 
the price too soon would set the wildcatters loose again in areas where we know 
there is oil and production would swamp us again.’ 

Several factors contributed to the finding and rapid developing to maximum yield* 

of so many large pools during the past thirty months resulting in unprecedented over- 


106 OILDOM: ITS TREASURES AND TRAGEDIES 


raw materials with which he has to work, and prompts him to find ways and 
means of lengthening out the supply, through more efficient distillation and 
smaller losses one way and another; if it forces the automobile manufac- 
turer to study more carefully the principle of carburation; if it brings 
greater degree of sanity among the people; if it stirs the Government 
to a more practical and patriotic defense of a great industry; if it brings 
cohesion among petroleum organizations; if it results in a cessation of un- 
reliable and unintelligent information concerning the industry to the public; 
if it secures the merging of the various departments and bureaus handling 
oil matters at Washington into one comprehensive and well directed board, 
then shall we have cause to congratulate ourselves over what has been 
done. 

“One thing more than anything else is needed * * * and that is 
not only complete statistics, but a comprehensive interpretation of the 
same. One of the difficulties today is not so much the meagerness of oil 
statistics sent out from Washington as the unfortunate interpretation of 
the same. But there is no cause for discouragement or fear. The oil in- 
dustry is progressing and, broadly viewed, is in better condition today than 
it has ever been before. It must be borne in mind that from Drake to this 
day it has been peculiar of oil that it has always been on the verge of 
disaster from either over-production or over-consumpticn, yet its course 
has always been forward to bigger and better things.” 


production: (1) Wider application of geology, (2) use of (diamond) core drills, (3) 
deeper and faster drilling with rotaries, (4) improvements in tools and equipment, 
(5) employment of production engineers, and (6) use of trucks and even tractors. 


An Associated Press dispatch in the Washington Star, December 31, 1923, quotes 
W. C. Teagle, president of the Standard, of New Jersey, to the effect that no other 
industry holds quite the uncertainty that the vil business does, since no one can 
foretell for any long period ahead the course of petroleum production. ‘‘Throughout 
1923 the volume of business has been good, but much of it at prices that allowed no 
profit to the producer, refiner or marketer, unless the latter happened to be a jobber 
with no liabilities either as a producer of crude or as a refiner * * * With further 
gains in consumption (following the late drop in production) it looks right now as 
though the country should begin consuming more petroleum than it produces around — 
the middle of 1924.’’ 


A recent estimate appearing in the Wall Street Journal places the total retail value 
of petroleum products, inclusive of the crude directly consumed, at. $5,000,000,000 
compared with a wholesale value of farm crops of $8,323,000,000 for the year 19253. 
The retail value of farm products was likely not less than $15,000,000,000. 


The past year proved tragical, as usual, to many victims of oil-stock frauds; but 
it also developed a Nemesis in Postmaster General New and another in Attorney Gen- 
eral Daugherty, who, cooperating with Texas authorities and the National Vigilance 
Committee of the Associated Advertising Clubs of the World have terminated the 
-activities of certain “‘worth’’ less swindlers and thus partly removed unjust reflections 
on a respectable though leaderless industry (see Chapter XIII, in part two). 


CHAPTER VII. GASOLINE AND THE AUTOMOTIVE 
INDUSTRY 


These two subjects are treated together in one chapter because (1) the 
existence of a suitable fuel was the great incentive to the application of in- 
ternal combustion engines to the moving of horseless vehicles, and (2) nearly 
90 per cent of the gasoline produced is at present consumed by autos, trucks 
and tractors. 


GASOLINE OR MOTOR FUEL* 


What Gasoline Is. It is not a single hydrocarbon (i. e., a compound of 
the elements carbon and hydrogen), but a. mixture of very many different 
hydrocarbons, some of similar and some of different boiling points; therefore, 
gasoline will not boil at one temperature but within a long range of tempera- 
tures. Thus a commercial gasoline which meets the Bureau of Mines speci- 
fications, will begin to boil at about 140° F., while the heaviest parts of it 
will not boil much below 437° F. The main point is that a good commercial 
gasoline should have a uniform range of boiling points from the lowest to the 
highest, and this and not the gravity should be the criterion of quality.~ In 
the early days of refining, when kerosene was the chief product and was 
priced higher than gasoline, the distilling operations were so regulated that 
the “naphtha distillate,” now practically all used for the manufacture of 
gasoline, was then included in the kerosene fraction with respect to the 
higher boiling fractions of what is now called gasoline. 


Three Sources of Gasoline. The big bulk of this light liquid comes 
from refineries using the so-called straight run process. Probably 85 per 
cent of all the 147.6 million barrels of refinery gasoline -produced in 1922 
was obtained in this way, the cracking processes having been the source of 
the rest. According to Messrs. Dean and Jacobs, cracking has now become 
a factor of decided commercial importance, the daily production from Bur- 
ton stills having been about 2 million gallons during 1921. The processes of 
cracking to increase the yield of gasoline came into use in the course of 
a decade as a result of the extraordinary demand for motor fuel; but their 
use entails a sacrifice of other products. In 55 Mid-Continent independent 
refining plants there are no less than 20 different types of the process in 
use besides the many more on the market.|| 


* The term ‘‘Gasoline”’ is used rather loosely in the commercial world. In England 
it is called petrol, in Germany benzin, elsewhere in Europe essence, and in some British 
colonies motor spirits. 

j In the early days the gravity range was only 6°, from 66° to 72° Baumé (Page 
175, “Mexican Petroleum” by W. J. Archer) ; now the range is nearly 20° if not greater. 
See page 77, “The Texas Company, Its Facilities and Products,’’ by The Texas Co., 17 
Battery Place, New York. 

t Bureau of Mines’ Technical paper 258, Production of gasoline by cracking 
heavier oils,’ 1921. 

|| The Lamp, May, 1923. 

The Oil Trade Journal, Sept., 1922, describes the McAfee process of the Gulf 
Refining Co. which employs aluminum -chloride as a catalyzer at temperatures of 500° 
to 600° for converting high boiling petroleums into gasoline, etc., with a recovery of 
80 to 85 per cent. 

(107) 


108 OILDOM: ITS TREASURES AND TRAGEDIES 


SKIMMING PLANT INTERMEDIATE COMPLETE REFINERY COMPLETE REFINERY COMPLETE REFINERY TOPPING PLANT 


REFINERY 
MID-CONTINENT CRUDE FIRE DISTILLATION STEAM DISTILLATION GTEAM DISTILLATION STEAM DISTILLATION CALIF. CRUDE 
MID-CONTINENT CRUDE PENN. CRUDE MID-CONTINENT CRUDE GULF COAST CRUDE 


el 
& 


(Fa) 
Baan 
28cCo% 


Sins 
‘ at 
ayawe 
SWAIN 


YO OY 
‘Aa22 


r 
Leo2L0LCn 


\ SSS = erat 


3 


CRUDE OILS YIELD UNEQUAL QUANTITIES OF GASOLINE 


That is why a ratio between the price of gasoline and the price of crude 
cannot be fixed. 

This chart also shows that the lubricant element is lost if present in 
crude oil run through skimming and topping plants; and why .Pennsylvania 
crude commands the highest price. (Reprinted from Pogue’s ‘‘Economics of 
Petroleum,”’ by permission of John Wiley and Sons, Inc.) 


—The Bessemer Gas Engine Co., Grove City, Pa. 


PLANT FOR RECOVERING GASOLINE FROM CASING-HHAD GAS 


_ Located at Lamberton, Ark., and owned by Koppers Co., a Mellon subsidiary ; 
daily capacity, 7,500 gals. raw gasoline. Note the derrick over the well, the absorp- 
tion tower nearby, and the condenser at the extreme left. Unlike oil refineries, plants 
for recovering gasoline from natural gas are placed not far from the oil and gas 
wells that supply the fluid. 


OILDOM: ITS TREASURES AND TRAGEDIES 109 


' Natural gas, or so-called casing-head gas of oil wells, is the third 
source of gasoline. The liquid, formerly lost, is recovered very largely in 
two ways: (1) By compression (and cooling) of very “wet” or rich gas, 
this being the first method used; and (2) by absorption with the help of 
oils cut usually between heavy kerosene and light lubricating oil, although 
by enriching naptha as the absorbent the latter may be marketed directly as 
gasoline. It pays to use the second method even if the yield of gasoline is as 
low as 0.2 gallons per 1,000 cu. ft.; but not the first, at least in the Mid- 
Continent field, if the yield is less than 1 to 1% gallons. Some gas there 
contains as much as 23, gallons per 1,000 cu. ft.* Since 1910 the casing-head 
gasoline industry has added materially to the supply of motor fuel. In 
1911 the 176 plants produced only 277,000 bbls.; in 1921 the 1,056 plants 
produced about 10,700,000 bbls. from 480,000,000 M cubic feet of gas. The 
estimated yield in 1922 was 506,000,000 gallons or about 12,000,000 bbls. 
worth $72,700,000. There are seven times as many compression as absorp- 
tion plants, but they produce hardly one-fourth as much gasoline as the lat- 
ter. This conservation (i. e., utilization) of a natural resource once wantonly 
wasted now doubly helps the motoring public: (1) By blending natural gaso- 
line with the refinery product, in quantities up to 15 per cent, an increased 
extraction of “straight-run” gasoline is made possible (through raising the 
end-point, that is, distilling with it some of the heavier liquids, or fractions 
having higher boiling points, such as part of the old-time kerosene) ; and 
(2) by making a much better product from a standpoint of motor efficiency 
whether in regard to power, mileage, volatility or carbon.+ 


REMARKABLE GROWTH OF THE GASOLINE INDUSTRY. 


Production. The following table shows the rapid increase in output 
and in exports expressed in millions of barrels of 42 gallons each: 


Year Yield Exports Year Yield Exports 
A) ee ee ees Se Oe Tk 6.3 0.6 AS Wo lbs pea sie. ie Se cea = he Ser be 94.2 9.0 
LUNN Se SEAS ae hy pape eerie ee 12:3 1.6 pW P48 eaten oly a ba ge. Seren eed 115.8 15.0 
CRO it > ee a a ee 34.9 5.0 SSN PTS ea a ae tPA 6 IDyre 
ARS Wass Renee ae. a er 41.6 6.5 gS pa) © Aa Eg aie g Gr, See Be 147.6 1330 


The yield of gasoline during 1923 approximates 180 million barrels. 
The exports are proceeding at a rate of about 9 per cent of the yield. 

This tremendous growth, about 2,200 per cent in 18 years, 1904-22, has 
been attained: (1) By discovering new pools; (2) by introducing the casing- 
head gasoline industry, (3) by applying the cracking processes and im- 


* Extraction of Gasoline from Gas, Chap. XIX, ‘The Business of Oil Production,” 
Johnson-Huntley-Somers, pub. 1922 by John Wiley & Sons, Inc., New York. Leslie, in 
“Motor Fuels” says it pays to use the absorption process if the gasoline yield is 0.1 
to 1.0 gallon per 1,000 cu. ft. In (3) the adsorption process, solids are used, such as 
charcoal and Silica-gel molecularly and not mechanically to take up the gasoline 
temporarily. According to F. P. Peterson,** who has been identified with the business 
since its inception, commercial development started near Kinzua, Pa., where a small 
plant was built by John L. Gray in the years 1907-1910, closely followed by work at 
Sisterville, W. Va., and Bolivar, N. Y. 

~The Association of Natural Gasoline Manufacturers is prepared to prove that the 
economic value of straight-run gasoline is enhanced by this operation of adding natural 
gasoline to the refinery product.—D. E. Buchanan on “‘Handling of Natural Gasoline.” 
read at the New Orleans convention of the Western Petroleum Refiners Assn., 3-9-1922 
according to The Oil Weekly, April 15, 1922.. See also ‘‘Casinghead Gasoline Manu- 
facture” by L. E. Barrows, The Texaco Star, Nov., 1922, and “Gasoline from Natural 
Gas’”’ by H. C. Hooper, The Lamp, April, 1920. 


110 OILDOM: ITS TREASURES AND TRAGEDIES 


proving other refinery methods, and (4) by producing gasoline of higher 
end point.* 

Consumption and Stoske Harmonizing with the great growth in the 
number of registered motor vehicles, the total consumption of gasoline has 
annually increased more rapidly than both the production and consump- 
tion of crude oil. Although the crude output has steadily gained it has 
not kept pace with the vast advance made in the number of operated 
vehicles; and so the number of barrels per car has fallen off as indicated 
in the illustration herewith. During the 8 years, 1915-1923, yield of crude 
gained 166 per cent, while the motor cars increased 470 per cent. The 
only way the fuel supply has been maintained has been by getting more 
and more gasoline out of a given quantity of crude. As shown above, the 
number of barrels of crude oil produced per vehicle has dropped from 
119 in 1915 to 45 in 1922, rising for the time being to 53 in 1923. 


U's. cRUDE OW INCREASE IN RECOVERY FROM 


eh 400.000 CRUDE 

Per Cent 

Yield in Million Bbls. from 
Year Total Crude Gasoline Crude* 

LOO Feast cee 183.2 12.9 9.3 

gO by: weet 2 ee aten 265.8. - 384.9 17.5 

TOTS cae eae 281.1 41.6 18.3 

LOL Gor = Peace 335.3 67.9 21.6 

LOU cass eS 378.4 94.2 26.1 

700,000 MotorVehicles Registered in US. ee Pre oe ae a 180(?) er 
* Per cent of crude oil run through the 

Oe Seiad tien » stills; not per cent of the total yield. 


PRODUCTION 
300, 700,000 
BARRELS 
86 BARRELS 


PER MOTOR 
VEHICLE 


PRODUCTION AND CONSUMP.- 
TION PER MOTOR VEHICLE 


Million Barrels per Vehicle 


Year Vehicles** Crude Gasoline 
DOU ras Lee aes 2.4 119 14.3 
A OF Gis paca boa alamo 3.5 86 11.5 
SEP q IKE 9 R(t dinde® Sash uk 66 11.7 
GL Sime ck see aes =O: 
3512,000 MotorVehiclesRegistered inUS. een vi ee ve ae tos 
1.92.) ae aan ae ee 9.2 48 11.4 
SLOD ee Soe oes 10.5 45 10.4 


U.S. CRUDE OIL ie age fae Ser 12.2 45 10.5 
ao SS eee 
BARRELS 


** The tabulated statistics of registered 
motor vehicles and production of crude oil 
per car for 1921 are later than those which 
are shown in the figure to the left. MHith- 
erto, future production of motor vehicles 
has generally been underestimated by the 
best of authorities from year to year; and 
the domestic saturation point may be 
reached by 19380, or sooner if motor high- 
ways are rapidly extended. 

4 = About 300,000 trucks were owned on 
9,500,000 Motor Vehicles Registered in U.S. farms in 1922. ae sore ae per ene alt 
piss ' the motor cars belonge ere. n Jan. 1, 
THN-YEAR GROWTH OF TWO GIANT 1924, there were about 4,250,000 cars of all 

INDUSTRIES (From Mining and kinds owned by farmers in the United 

Oil Bulletin) States—or 4% of the world’s motor vehicles. 


* “Growth of the Gasoline Industry,’ W. C. Mundt, chief engr., The Teaxs Pipe 
Line Co. of Okla., in The Texas Star, March, 1922. The figure on page 124 shows the 
rising end point. Semi-annual motor gasoline surveys of the Bureau of Mines show a 
tendency toward uniformity in straight run gasoline in'so far as the range in end points 
has diminished from 115° IF’. in 1917 to 54° F. in January, 1923. 


OILDOM: ITS TREASURES AND TRAGEDIES 111 


On the other hand, the consumption of gasoline :per motor vehicle 
has fluctuated very little the 
last 8 years, as seen in the 
preceding table. From 1914 
to 19238, inclusive, the trac- 
tors, trucks and passenger 
cars consumed altogether 80 
per cent of the 820 million 
barrels used in the United 
States beginning with 26 
per cent in 1910 and increas- 
ing to 43 per cent in 1914, 
according to the accompany- 
ing chart. Of all the gaso- 
line now used, 90 per cent 
propels motor vehicles. While 
the average annual consump- 
tion per car during the past 
9 years was 380 gallons, 
the annual rate during 1923 PERCENTAGE ANALYSIS OF THE DEMAND 
and at its close was about . FOR GASOLINE, 1910-1920* 

500 gallons. There exists 

not only a time variation, but also a geographic range in the demand for 
motor fuel. On account of the climate, the annual consumption per car is 
considerably greater in Florida and California than, for instance, in Minne- 
sota and Montana, where the winter weather interferes with motoring. 
(See chapter VIII.) In most of the northern states there occurs a seasonal 
change, the rate of demand dropping with the fall in temperature (or fall 
of snow) and with the rise in quality of the gasoline. Furthermore, trucks, 
take more fuel than pleasure cars. A few years ago, according to Pogue, 
the annual consumption factors were as follows: For passenger cars, 300 
gals.; light trucks, 1,000. gals.; and heavy trucks and tractors, 2,000 gals. 

In 1923 our total demand for motor fuel exclusive of kerosene ap- 


proximated 4 times that in 1916, only seven years before, as set forth in 
the following table: 


fom) 
000 
e}O0 00 
ogo 
& Reale | 
[oh AT) 
fe) 

ie) 

° 

(e) 

(e) 


te) 
° 
[e) 
le} 


Ok ml enh 
1910 1911 1912 1913 1914 1915 1916 1917 1918 1919 1920 1921 


RECENT INCREASE IN CONSUMPTION AND STOCKS OF GASOLINE 
(Millions of Barrels) 


Year Indicated Stocks Days Year Indicated Stocks Days 
Consumption Dec. 31 Supply '. Consumption Dec. 31 Supply 
Told 2G 6.7 80 16192 2h S27: 00la~). | 24.0 44 
cb) Ry Se eee 34.9 4.9 50 192022026 101.5 TAD 34 
1916__...__ 40.6 ? ? a Fo yA) Wehics Sy 108.0 10.6 49 
Uy Face eee 58.4 9.8 57 1022 fe 127.0 21.4 t 57 
Ep ee 74.8 7.1 port: ta ee ee 160(?) 23.3 : 48 


In calculating the number of days’ supply, allowance has been made for the export 
demand, in which there was a decided drop in 1919, thus leaving 49 days’ surplus for 
home consumption at the end of that year. 


*From Pogue’s “Heonomics of Petroleum,’ p. 127; reproduced by permission of 
the author and the publisher, John Wiley & Sons, Inc. 


Ss 


Shove 


—NMining and Oil Bulletin, Los Angeles. 
“CARRYING COAL TO NEWCASTLE,” MIDDLE OF 1920 


The first of 7 train loads of gasoline from Texas to reach Los Angeles for re- 
lieving the sharp shortage over three years ago. In this train were 25 tank cars of 
8,080 gallons or 192 barrels each. At 27 cents a gallon each carload was worth over 


'$2.180. Mayor M. P. Snyder is seen greeting E. W. Clarke, general manager of the 
Union Oil Co., of Calif. 


OILDOM: ITS TREASURES AND TRAGEDIES 113 


PERE 


Annval rate of supply (production plus imports) 
Annval rate of consumption (domestic consumption plus exports) 

Stocks at end of month ny 
Number of days supply of sfocks iN & 


Gallons in Billions 


Days Supply 


>h<—----- 1921 ---->4<--------- 1922--->t< -------- 192 --- 


june Sept. Dec. Mar. June Sept. Dec. Mar. June Sept. Dec Mor. June Sept. Dec. Mar. June Sept. Dec. Mar. June Sept. Dec. Mar. 
91 ----><---------1920 --->«-— - -—> 3--->K< =>- 


Sept. Dec Mar. 
-—-- I917>}<--------- 1918 ---->}<- ------- 1919 
GRAPHIC REPRESENTATION OF THE SEASONAL CHANGES IN CONSUMPTION © 
AND STOCKS, THE TREND IN SUPPLY AND CONSUMPTION, AND THE NUM- 
BER OF DAYS SUPPLY OF GASOLINE, FOR SEVEN YEARS 
Note that, as demand drops toward midwinter the stocks and the number of days 
supply rise. The ‘Kinks’ in the graph of supply (production plus imports) are 
largely due to the impulse in production arising from the flush yield of new fields 
whose crude oils contain noticeable percentages of gasoline. 


Stocks of gasoline increased about fivefold during the past 8 years; 
and despite the quadrupling of the output in that time there does not ap- 
pear any improvement in the number of days’ supply on hand—50 at the 
end of 1915 and about 48 at the end of 1923 (allowing for a seasonal drop 
in demand after Oct. 31). Compared with gasoline in the matter of stocks 
on Oct. 31, 1928, crude oil shows up to better advantage; 350,000,000 
bbls. of crude oil, equivalent to 168 days’ supply, and only 22,500,000 
bbls. gasoline, or 47.5 days’ supply. Supplies of gasoline stored above 
ground were the greatest in the history of the United States at the end of 
April, 1923. They amounted then to the enormous quantity of 1,336.4 mil- 
lion gallons, or 31.8 million barrels; and compared with the maximum 
monthly yield of 659 million gallons, or 15.7 million barrels attained in 
October, 1923. (The illustration herewith, from Mining and Metallurgy, 
shows the attainment of peak in both stocks and consumption of gasoline 


during the year 1923.) 


PRICES AND MARKETING OF MOTOR FUEL 


Marketing Gasoline. So little kerosene has so far been used in the 
United States for propelling vehicles, that its marketing problems will not 
be taken up here. - Public interest is focused on the prices and marketing 
of gasoline. The wholesale price of gasoline at Oklahoma refineries in 
October, 1923, has already been given in comparison with the prices of 
other products, in Chapter VI. The two illustrations herewith set forth 


114 OILDOM: ITS TREASURES AND TRAGEDIES 


Price, cents. 


Lt 
6F 
Te 
ee 
@ 
Le 
6¢ 
9 
£9 


| 


1907 
1908 
1909. 
1410 
1911 
1912 
1913 
1914 
1915 


ae ts ee 


“S180 A 


1916 


1917 


1918 


1919 a 
ane f | 
goats, chasms ee q iad | Le 


PRICE CHANGES ARE MORE GRADUAL IN GASOLINE THAN IN CRUDE 


a, wholesale price per gallon of gasoline in New York City: b, average price of 
one-fifth barrel of crude oil. (Bureau of Mines, Motor Gasoline Survey of 1920 and 
1921, page 6.) A part of the advance in the price during the latter part of 1915 resulted 
from increasing demand for motor fuel and decreasing production of light crude oil, 
particularly from the great cushing pool (page 16, “Report on the Price of -Gasoline 
in 1915,” Federal Trade Commission, 1917). Over-consumption in 1919 culminated in 
the shortage of 1920, felt mainly in California, accounted for the 4-cent increase four 
years ago. (For average wholesale prices of gasoline, 1913 to 1921, see page 164, Bul- 
letin 320 of the U. S. Bureau of Labor Statistics.) Late in April, 1928, the tank wagon 
price of New York City had dropped to 22.5 cents; and on July 23, 1923, it fell 
further, to 20.5 cents compared with 238 cents retail. In early December, 1923, the 
general average wholesale price in the United States was not over 14.5 cents. 


Wy: 


! 
i 
[rads 
1 
| 
! 


_ Highest level reoched COMPARATIVE PRICES. 
in ears, en eee 

susan [79/5-/942. OF STAPLE COMMODITIES — 
LUMBER" in Den 1982 at Peak ane 
~-tsTeEp Rupes = fore Ine Nake. 
mgmee sb ce aC S5cortoN == 
PMMRERRC RES fp 
CE 

man eae skew eae COAL CINE: MENT. 
Deeg etl eth coaleees 

vay 8=©— eden Sl re eer ol Be al Nee veeing) SNe FRA dt DEC.. pee eee 


wae Sis nih CYL Of AGIA LE PPA War  PTIGeS a 


GASOLINE NOW IS CHEAPER THAN IN DECEMBER, 1922, WHEN IT WAS 
LOWER PRICED THAN ALL THE OTHER COMMODITIES HERE 
CONSIDERED, EXCEPTING CRUDE OIL 

Coal was at peak price and cement nearly at peak in* December, 1922, when 
gasoline was only 25 per cent above its pre-war price in 1913. All the staples above © 


reprepresented, excepting cement, reached higher peak prices than gasoline during the 
10-year period, 1913-1922. 


OILDOM: ITS TREASURES AND TRAGEDIES 115 


three essential facts for popular consideration: (1) Gasoline has not 
fluctuated in price as far or as fast as the raw material from which it is 
extracted; (2) compared with the pre-war prices of 1913, the price of - 
gasoline in December, 1922, had not risen as much as the prices of most 
other common commodities; and (3) the peak price of gasoline during 
the past ten years was relatively lower than that of all but two of the 
other ten articles represented. 
This greater stability in the price structure of gasoline compared with 
that of crude oil, is supported by the greater concentration of marketing 
agencies in the hands of the Standard Oil group and a few large inde- 


—Amony Ourselves, June, 1923. 
CIVIC PRIDE IMPELS| GASOLINE DISTRIBUTORS TO BEAUTIFY THEIR 
SERVICE STATIONS 


The various Standard companies handle almost half of the world’s gasoline 
and ‘lead in erecting ornamental stations in the United States. The latter often 
replace ugly structures, even corner saloons where another and diluted kind of 
liquid fuel was once wasted. In this view, taken at Alameda, is seen a eucalyptus 
tree, one of the first planted in California by the late Bishop Taylor who intro- 
duced, from Australia, this myrtaceous genus of evergreen which is said to grow 
400 feet tall. On January 1, 1924, the total investment in American marketing 
facilities must have exceeded $800,000,000. 


pendents. Fortunately, such concentration has not been badly abused al- 
though the Federal Trade Commission reported, June 1, 1920, that “price 
initiative today seems to be left generally to the Standard companies and 
competition is apparently directed more to developing facilities for gettting 
business than to seeking it by underselling.” In regard to economy and 
efficiency the distribution of gasoline stands almost without a rival in the 
entire commercial field. It is because of its volatile nature and the wide- 
spread demand for it that the facilities for marketing gasoline have been 
perfected more than those for handling the other refinery products (see 
Chapter VI). Differences exist in the marketing practice in various 
parts of the country despite the fact that the Standard Oil group refines 
fully 45 per cent and sells 65 per cent of the gasoline. 

Economically, the marketing of gasoline has become a rather simple 


116 OILDOM: ITS TREASURES AND TRAGEDIES 


problem since the auto craze began to spread, and this product no longer 


remained a “white elephant” or “soup-bone surplus” con the hands of the 


refiner. However, with the development of the casing-head gasoline in- 
dustry three special methods have arisen for disposing of this very volatile 
product: (1) Selling to a refinery for blending with low-grade gasoline in 
order to make a commercial grade of motor fuel; (2) buying the low- 
grade naphtha for blending at the natural-gas gasoline plant, which then 
markets its own gasoline, and (8) selling the product without blending for 
‘ special purposes. There is a small but growing market for the light ab- 
sorption gasoline in the chemical industries as well as for aeroplane fuel. 


American Prices of Motor Fuel. These have never been high con- 
sidering the prices paid by the consumers in foreign lands; nor have they 
been high recently compared with the pre-war prices of 1913. Throughout 
the 11-state territory of the Standard of Indiana and in line with the 
rising cost of crude oil, the price of gasoline was advanced 2 cents on 
December 29, 1923. In Chicago the prices then became 14 cents from tank 
wagons and 16 cents at filling stations; and on Jan. 13, 1924, they rose 
respectively to 16 and 18 cents. (See Oil Trade Jn’l., Jan., 1924.) 


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GASOLINE MARKETING TERRITORIES OF THE STANDARD COMPANIES 


Map from the Federal Trade Commission’s report dated April 11, 1917; reproduced 
in Pogue’s “Economics of Petroleum.” 


The price “war” of the past year was clearly not a wise affair, for 
it did not permanently benefit the consumer but instead drove some in- 
dependent dealers out of business. However, through cooperative buying, 
the farmers of South Dakota and other states should be able to get gaso- 
line as well as kerosene so reasonable that they will again turn to tractors 
for reducing their operating costs.* Of greater economie importance than 
the seemingly high prices prevailing from 1916 to the middle of 1923, is the 

* While in the Red River valley, in the fall of 1923, the author learned that 
many wheat growers of Minnesota and North Dakota had discarded their tractors 
when gasoline went above 22 cents or kerosene above 15 cents. 


OILDOM: ITS TREASURES AND TRAGEDIES 5 


enormous waste of this popular liquid—95 per cent of the efficiency* and at 
least 30 per cent of the substance itself. For obvious reasons, one being 
this continued waste of motor fuel, further price increases may be ex- 
pected during the year 1924. ; 

Few consumers realize that in 1923 there were places in the United 
States where distilled water sold for more than gasoline, itself a product 
of distillation. How many motorists, complaining at a price of. 25 cents 
to 30 cents a gallon for gasoline consider that they pay for coca-cola at 
the rate of over 40 cents a gallon when they indulge in the diluted drink 
at 5 cents a glass? 


Most important for motorists to know, in this connection, is that of 
the total of $7,783,000,000 spent on motor cars in 1921,} inclusive of their 
operation, less than 11 per cent was for gasoline; yet this item caused more 
agitation and animosity than all the other items that made up this huge 
expenditure. 


A Defense of Fair Prices and a Badly Abused Industry. According 
to The Oil Weekly of November 3, 1923, the Mid-Continent Oil and Gas 
Association has carried on a publicity campaign to forestall unfair legis- . 
lation and to stem the tide of adverse public opinion. Following are the 
author’s abstracts of corrected statements published by this independent 
organization. They are worthy of serious-consideration by all fair-minded 
Americans, members of law-making bodies in particular. 


Alleged manipulations of prices and rumors of “dollar gasoline”’ greatly concern 
you, as motorists. You may have asked, what truth is there in it? Ask yourself, AM Es 
gasoline cost a dollar a gallon, how much will I use?’ Such a prohibitive price would 
Tenet motoring among 14,000,000 American families so severely that very little market 
for gasoline would remain. Huge refineries would be idle, and the petroleum industry 
would lose the business for which it has labored full 50 years. 


Since gasoline is the product of a competitive industry, raising its price unreasonably 
would prove imvossible. There are about 15,000 separate and independent producers 
of crude oil, nearly 500 separate refiners producing gasoline, and 4,000 separate whole- 
salers or marketing companies. Competition is keen; and as the price of gasoline goes 
up, output is increased until demand is overtaken and the price falls again. 


The average refining company makes less than one cent per gallon on gasoline. 
This is less than $3.00 on an average annual run of: 5,000 miles per car. Compare 
this with the profit on any other commodity known to you. You and your fellow 
motorists pay this profit of a nickel on a 5-gallon purchase—for what? For competing 
in the oil fields with 499 other refiners obtaining crude oil needed. (For paying in- 
terest on refinery investments exceeding 2 billion dollars.) For spending $100,000,000 
yearly in repairs and new equipment, maintaining an organization of almost 70.000 
employees, and devising scientific ways and means for economically extracting the most 
good gasoline from each barrel of crude oil. For finding a market for the products 
less in demand so as to keep down the price of gasoline. For carrying ample stocks 
of gasoline to. meet emergencies and seasonal changes. For maintaining a wholesale 
distributing system to insure the delivery of gasoline conveniently (and often at all 


hou For all this service they receive a profit of hardly a cent a gallon. Is it too 
much? 


At no time during or after the war did the price of gasoline sky rocket. When 
you were paying two and three times what you had been accustomed to pay for food, 
clothing, rent, and building materials, gasoline for your motor cost little more than 
before the war. Even crude petroleum, the source of gasoline, rose much higher than 
gasoline (see figure on an adjacent page)... Why has the price of gasoline been held 
down? Because the companies have been carefully and efficiently managed under 
private ownership. They are not hampered (as in other countries where gasoline is 
costly) by expensive government regulations, but have been left free to serve the public 
with initiative, energy and economy. Gasoline is cheap today. Governmental inter- 
ference could result only in overburdening the industry and increasing the cost of all 
petroleum products to you, the consuming public. 


+B. F. Kettering. General Motors Research Corporation, addressing the American 
Petroleum Institute, St. Louis, December, 1923. 


During periods of gasoline shortage, the joy riders rarely reduce their demands 
for the benefit of food producers who utilize trucks and tractors. 

* According to Dr. Edwin G. Slosson, Director of Science Service, 1115 Con- 
necticut Ave., Washington, D. C, 


118 OILDOM: ITS TREASURES. AND TRAGEDIES 


WHITE TRUCK WORKING OUT OF BAJEN, COLUMBIA, 

American trucks, like American drills, are fast invading foreign oil fields. Our 
exports of motor trucks increased 53%, from 7,480 in 1921 to 11,455, in 1922—448 to 
South America and 983 to Mexico; but in 1921, with the Mexican oil industry at peak, 
1922, 10.5 per cent were trucks; but of 4,014,000 made in 1923 only 9.2 per cent 
were trucks. ; 


MOTORIZING THE 
WORLD’S FISHING 
FLEET 


This type of craft, 
brought from sunny Italy 
to San Francisco Bay, no 
longer depends on Sail alone 
for motive power. (Stand- 
ard Oil Bulletin.) 

Norway’s fishermen now 
consume 100,000 bbls. of 
distillates every year, being 
supplied largely by A. S. 
Norsk Braendselsolje, an 
Anglo-Persian subsidiary. 


i 


‘THE FAMOUS FIAT CAR WHICH WON THE ITALIAN GRAND PRIX 


The driver was Pietro Bordino, shown here at the wheel. The Fiat is the best 
known European car in the United States. (The Lamp, Oct., 1923.) 


OILDOM: ITS TREASURES AND ‘TRAGEDIES 119 


ALCOHOL, BENZOL AND OTHER SUBSTITUTES 


Substitutes Eventually Essential. With few exceptions the varying 
supply of gasoline has hitherto sufficed for the steadily increasing demand. 
But because of the higher prices abroad, as in France (see page 16), the 
advantages of using composite motor fuels have already been recognized. 
Eventually, American consumers must pass through this same stage, but 
it may be 50 to 75 years before gasoline will be almost entirely sup- 
planted. This is a great problem with which our foresighted scientists 
are concerned, namely the source of our future supply of motor fuel. 
“How much will be needed and how much will it cost?” has been largely 
answered by E. H. Leslie in his new book entitled ‘‘Motor Fuels.’’* Even- 
tually, when domestic and foreign: deposits of petroleum shall have been 
depleted, perhaps in a hundred years, America will either have become 
motorless or will have developed satisfactory substitutes. | 


Alcohol as Motor Fuel is not of present importance in the United 
States. Ethyl alcohol is not fit for use in gasoline motors. Its vapor 
pressure is only one-fourth that of gasoline, and its latent heat of vapor- 
ization is 3.2 times that of gasoline, wherefore a gasoline engine is started 
with difficulty. This may be overcome by adding ether to the alcohol, by 
priming the cylinders, or by starting with a special fuel. Alcohol is also 
inferior in net heat of combustion, only 4-7 that of gasoline which is 
19,000 British thermal units per pound. But it can be burned under pres- 
sure 2 to 3 times the maximum under which gasoline may be burned 
without knocking. It also burns without forming carbon and is safer 
to handle and move than gasoline. However, alcohol is handicapped for 
lack of distributive facilities. The maximum yield of alcohol, 202,000,000 
gallons, was reached in 1917. Over 27 per cent of this was denatured, 
the rest taxable, and the total made but 1.8 per cent of the gasoline con- 
sumed in 1921. From all of the 13 kinds of materials hardly more than 
500,000,000 gallons of alcohol can be produced, according to Leslie.* 


Composite Fuels. | Alcogas is a blend having a variable composition 
as follows, according to the U. S. Bureau of Standards: 


Components of Alcogas For Aviation For Automobiles 
OPS TES A IN ee a ie oN 5 oli SPO Nie nace ES 40 33 
Gasoline, ‘ eee teed oe NE here ett ES oh eS ee On 35 
Benzol, a 2 NL Pi iy ROE ape ant EARS pain era ee 17 25 
Ether, sy De Gf tos 1 Ge DP Th Tae Oe RR eae ene ee 8 7 


Alcohol and gasoline do not mix completely, and hence a blending 
agent such as ether or an aromatic distillate must be used. Until gasoline 
goes above 35 cents a gallon there is no show for a large alcohol industry 
on which most composite fuels would have to depend in part. Natalite is 
fuel-blend of alcohol and ether made from molasses first in 1914 at Natal, 
South Africa. Another composite fuel listed by Leslie is Signal Core 
Mixture consisting of 20 per cent benzol and 80 per cent gasoline by 
volume. This is not specially superior to gasoline. ‘Hector’ is 20 per 
cent benzol and 80 per cent cyclohexane, and has been patented by the 


* “Motor Fuels, Their Production and Technology,’ The Chemical Catalog Co., 19 
B. 24th St., New York, N. Y.; price, $7.00. The U. S. Dept. of Agriculture has esti-. 
mated that 300,000,000 gallons of ethyl or “grain” alcohol could be made yearly 
from saw-dust and other mill waste by special treatment. 


120 OILDOM: ITS TREASURES AND TRAGEDIES 


General Motors Corporation. A mixture of kerosene and benzol called 
“Liberty” has been sponsored by the General Engineer Depot, U. S. A. 


_ Miscellaneous. Naphthalene is a product obtained in the distillation 
of coal tar and is familiarly known as tar-camphor. Its high melting point 
alone prevents itS use as 
motor fuel; but it may be 
dissolved in benzol or gaso- 
line, and thus utilized to a 
limited extent, as in Ger- 
many. From it may be pro- 
duced _ tetrahydronaphtha- 
lene, or ‘‘tetraline,’ by the 
addition of hydrogen. Ac- 
cording to a British periodi- 
cal,* tetraline gave good re- 
sults when mixed with alco- 
hol, benzol and_ gasoline. 
Dynalkol, as described in the 
U. S. Consular Report, is the 
commercial name given in 
Czecho-Slovakia to a _ fuel 
consisting of 40 per cent 
alcohol and 60 per cent ben- 
-zol. Benzol probably ranks 
next to alcohol as a substi- 
tute for gasoline in quantity, 
but it does not compare in 
quality with tetraline. It 
yields more heat per gallon 
than gasoline but has sun- 


dry disadvantages if used . —Union Oil Bulletin. 
alone. A table comparing OIL SHALE DEPOSITS IN WESTERN 
benzol with gasoline has COLORADO 

been made by the Kansas View at the Falls of Parachute Creek. 


City Testing Laboratory.+ 

Shale-Oil as a Substitute. Even if all the coal mined in the United 
States were coked in by-product ovens, the quantity of motor fuel (benzol) 
produced thereby would amount to only 20 per cent of the annual domes- 


* The Pan-American Magazine, 50 Great Russell St., London. 


+ Waverly Petroleum Handbook, 8th edition, page 588, W. Oil Works Co., 54th St., 
Pittsburgh. . 

Under ‘‘International Aspects of the Petroleum Industry,’’ Van H. Manning wrote 
in Mining and Metallurgy, Feb., 1920: The products from the destructive distillation 
of coal can be used, in so far as they are available, to replace gasoline; but quan- 
titatively it seems out of the question to expect more than a minor alleviation from 
them. Coal can largely replace fuel oils. Alcohol can replace gasoline and has the 
advantage that it can be made from replaceable material—that is, from plants, pase be- 
cause of its cost it cannot compete in a large way with gasoline at present. * = 
Finally no substitutes are now known that will satisfactorily replace mineral eae 
jn the amount needed. ‘These facts indicate that we must inevitably seek foreign 
supplies in order to meet our own needs and compete in the world’s markets. Increased 
recovery and wiser utilization of our domestic supplies will help solve the: problem. 


See also Hngineering and Mining Journal- Press, June 10, 1922, and The Literary 
Digest, Aug. 5, 1922, page 27; Oct. 7, 1922, page 69; and Nov: 24, 1923, page 66. 


OILDOM: ITS TREASURES AND TRAGEDIES 121 


tic consumption of gasoline. Scientists have therefore turned to our 
vast deposits of oil shales with a view of obtaining the future supply of 
motor fuel from this source. Few of the optimistic writers on this subject 
realize that crude shale-oil contains only a small per cent of low-boiling 
hydrocarbons, and that is of poor quality. Tremendous tonnages of the 
rock would have to be mined or quarried and large capital would be re- 
quired for this purpose and for retorting the rock. The Bureau of Mines 
quotes estimates from 1 to 5 million dollars as the cost of a complete re- 
torting plant to handle 1,000 tons of shale daily; and if the average Rocky 
Mountain shale yielded 42 gallons to the ton it would take at least 2,150 
such plants operating 365 days a year to supply our domestic demand for 
crude oil at the annual rate prevailing in 1923.* 


CONSERVATION OF MOTOR FUEL.; 


The Society of Automotive Engineers is interested in the elimination 
of all forms of waste, including that of gasoline, the conservation of 
which is considered to be of particular importance. Gasoline has become 
‘a most important fuel because it has enabled us to place in the hands of 
almost everyone a prime mover in small units capable of reasonably satis- 
factory operation even by the most unintelligent. Due to the lack of tech- 
nical skill of the great majority of the operators the tendency toward 
waste of fuel operation is greatly increased. Changes in design of auto- 
motive apparatus except in the direction of more automatically correct 
operation does not offer as fruitful a field for improvement so far as 
economy is concerned, as does education of the user along the lines of 
more intelligent operation of the vehicle. 

Consumption. About 23 to 30 billion gallons of crude petroleum are 
used annually in this country in producing 5 to 7 billion gallons of gasoline, 
of which over 85 per cent is used by automotive vehicles for purposes of 
transportation. Of these vehicles, only a very small proportion are operated 
under centralized supervision to promote maximum economy of opera- 
tion. 

In the production and distribution of motor fuel from crude petro- 
leum, and in the use of this fuel, there is bound to be some waste as there 
is in all other commercial activities. Part of this is preventable by means 
already at our disposal. Other forms of waste, where prevention is 
probably possible, are the subject of concentrated study at the present 
time. The losses which occur in the manufacture and distribution of gaso- 
line are not directly within the province of the automotive industry, and 
we will therefore confine ourselves in this statement to the preventable 
waste in the actual use of fuel. 


* “The QOil-Shale Industry With Respect to the Petroleum Situation,” by J. R. 
Reeves, Eng. and Min. Journal-Press, April 21, 1923. Read “Billions of Barrels of Oil 
Locked up in Rocks,’ by Guy EH. Mitchell, National Geographic Magazine, Feb., 1918; 
Commerce Monthly, Feb., 1922, published by the National Bank of Commerce, New 
York; articles by Victor C. Alderson in Mining and Oil Bulletin, Dec., 1919, Jan., 1920, 
and Mar. -Apr., 1921, and in The Mining Congress Journal, Oct., 1922, Jan., 1923, and 
July, 1923, “Shale Oil Experiments,’’ Chas. EH. Kern, The Oil and Gas Jnl, Nov. 30, 
1922 ; “~The Oil-Shales of the U. S. and the Future of Petroleum,” R. H. Tingley, The 
Outlook, Oct. 17, 1923, and Bulletin 210, by M. J. Gavin (U. 8.), Bureau of Mines. 


“At one time (before the Drake discovery) over 50 companies were distilling oil 
from coal and shales.’’ Etienne A. Ritter, Hngineering and Mining Jn’l, Feb. 17, 1928. 


+Extracts from H. B. D. Exhibit No. 2, testimony before the Senate Committee 
investigating gasoline prices, made February 9, 1923, by H. B. Dickinson, Research 
Manager, for the Society of Automotive Engineers, which numbers 5000 members. 


122 OILDOM: ITS TREASURES AND TRAGEDIES 


Efficiency. The quality of gasoline, which partly determines its cost 
and the economy with which it. is used, evidently has a considerable bearing 
on the ability of the user to operate his vehicle with maximum efficiency. 
This feature of fuel production vitally concerns the automotive industry 
and has been the subject of research and development since 1912, under 
the auspices of the Society of Automotive Engineers and, further, of co- 
operative research under the joint direction of the engineers of the auto- 
motive industry and of the petroleum industry, as represented in the 
American Petroleum Institute. 


Limited Supply. Gasoline for motor fuel has come to be the highest- 
priced quantity product of. petroleum, except lubricating oil, and the 
motor vehicle is the largest single user of both products. Neither of them 
has any competitor at anything like the present prices, and petroleum, 
the source of both, exists only in limited quantities which may be ex- 
hausted in a comparatively short time. Hence the elimination of waste 
is as important for conservation as for the maintenance of a minimum 
fuel cost. Unfortunately, low cost and conservation do not always go 
together. In so far as the user is responsible for elimination of waste, a 
higher cost offers more incentive for economy. 


Internal Combustion. Essentially, the automobile engine consists of 
a number of cylinders in which gasoline vapor, mixed With air, is burned 
to produce pressure which is transmitted to moving pistons and applied 
as power to the crank-shaft and thence to the wheels. The fuel must 
be vaporized and intimately mixed with air in the correct proportions at 
the time that ignition takes place in order to allow of efficient combustion. 


Function of Carbureter. The carbureter and intake manifold are de- 
signed to mix the correct amount of fuel with the air, and to distribute 
the resulting mixture to the cylinders. The mixing of the fuel and the air 
begins in the carbureter and after continuing during the fae through 
the manifold is completed in the cylinder. 


Pre-Heating Helps Complete Combustion. With the low-volatility 
gasoline now being supplied for motor fuel, a considerable amount of heat 
is necessary for the proper mixing of the air and fuel. This heating may 
be applied in different ways, either by maintaining the cylinders at a 
proper temperature, or by supplying heat to the carburetor or the 
manifold or both. If the correct proportion of fuel to air is not used, or 
if the mixture is not uniformly distributed to the different cylinders, some 
fuel will be wasted. 


As a matter of fact, it begins to appear that the adoption of means 
for maintaining the engine at a uniform operating temperature under all 
climatic conditions will go a long way to improve economy. Experience 
indicates that this temperature should be fairly high to obtain the most 
efficient operating results. The economical use of fuel is thus promoted 
not only by the better utilization of the fuel itself; but also by maintain- 
ing the engine lubrication at maximum efficiency producing the lowest 
engine friction. It has been proved that temperatures provided by holding 
the cooling water at or near the boiling point are not too high. In addi- 
tion, for use in cold climates, it may prove desirable to provide extra heat. 
on the carbureter and manifold, especially at the time of starting, when 
the engine is cold. 


ae 
™ 
a 


AUTOMOTIVE, OIL AND AGRICULTURAL INDUSTRIES ARE INTERDEPENDENT 


Modern farm operations rely on petroleum for power, light and lubrication ; and in 
turn, many oil and gas wells are located on farm lands. Here is shown part of Peter 
Swenson’s ranch which helped to make Stephens County once the leader of all Texas 
counties in oil. This farmer and his son are not only lessors and royalty owners; they 
have been producers since 1918 when they formed the Swensondale Oil Co. 


PETROLEUM 
PERFORMS A 
DOUBLE DUTY 


It drives the 
caterpillar trac- 
tor and also the 
dusting outfit. It- 
self may be used 
as an insecticide. 


GOOD ROADS ENCOURAGE MOTORING AND HENCE THE PRODUCTION OF 
MOTOR VEHICLES AND MOTOR FUEL 

This pictures part of the California State Highway near Descanso on a route from 

Imperial Valley to San Diego. California ranks first in yield of oil, extent of auto 

roads and per capita motor vehicles. This is a logical consequence of having vast 


resources in petroleum and ambitious, progressive citizens who know how to attract 
tourists and dwellers from other states. 


124 OILDOM: ITS TREASURES AND TRAGEDIES 


Common Waste. A mixture may be twice too rich in fuel and still 
produce power, without any obvious bad effects to warn the operator that 
he is wasting fuel. Overrich mixtures are commonly used for reasons 
given below. Tests by the Bureau of Mines on 100 or more trucks and 
passenger cars picked out at random on a city street have shown that in 
average operation of trucks and passenger cars, 25 per cent of the fuel 
drawn into the engine passes out of the exhaust unburned. 

Causes of Waste. The causes of waste of this kind are chargeable 
partly to the designer and partly to the user of the vehicle, or to the me- 
chanic who attends to the adjustment. Practically all fuel systems re- 
quire adjustment to give the correct fuel mixture. If these adjustments 
are not properly made, the waste of fuel may be 50 per cent, and probably 
the average loss in practice is at least 20 per cent. Owing to the large 
number of unintelligent and careless drivers who operate cars, it would. 
be better if the carbureter setting and other adjustments could be made 
at the factory, but owing to variations in fuel and in weather conditions, 
this has not proved feasible up to date. : 

If the carbureter is so constructed that the correct mixture is not 
supplied under all driving conditions without continual hand adjustment, 
or if the mixture between the fuel and the air is not sufficiently complete 
at the time of ignition, there will be waste which no amount of care in 
adjustment can prevent. As to the question of a sufficiently intimate 
mixture, this involves the complete design of the power plant, including 
the carbureter, manifold, and engine, it being understood that the final 

DEGREES 
F. 


475 


ANALYSES BY 


450| O=U.S. BUREAU OF MINES 
A= AUTOMOTIVE FUEL CLUB, DETROIT 
X= MISCELLANEOUS 


mixture is produced by means of a violent agitation with the addition of 
heat. There.is little doubt that one-half the cars in use are deficient in 
design in the respects which make for proper mixture of fuel and air 
before ignition, and that the fuel consumption of these cars could be re- 
duced at least 20 per cent by slight. modifications in design and, in many 
cases, by simply replacing the parts which make up the fuel system by 
parts more efficierit and already available. _ ; 
Another direct source of fuel waste is the. bad mechanical condition 
of many automobile and truck engines in sérvice. Worn or improperly 
adjusted pistons and valves and ignition failures all waste fuel. Waste 
of this kind is partly a question of design and construction. 
; Raising Boiling Point Increased Supply. Commercial gasoline as sold 
to. the consumer has become more and more difficult to use with economy, 


OILDOM: ITS TREASURES AND TRAGEDIES 125 


Gasoline is a mixture of different constituents having different degrees 
of volatility or ease of vaporization. Up to about 1912 commercial gaso- 
line contained only the most volatile constituents and offered no difficulty 
in vaporizing for producing a satisfactory mixture for use in the simplest 
type of engine. With the increasing demand it became necessary for the 
producer to include heavier and less volatile constituents, which require 
more heat for their vaporization, and as this process went on from 1912 
to 1920, the utmost efforts of the designers were necessary to keep pace 
with the change in fuel and maintain reasonable economy. 

We believe that the American automotive engineer is even now in 
advance of all others in the technique of economical fuel utilization. In 
dealing with the fuels of low volatility marketed in this country he has 
learned much as to the behavior of fuels in the engine and has profited 
by this knowledge in the design of efficient vehicles. 

Mileage per Gallon. European cars average more miles to the gallon 
than American cars, but when reduced to a common basis of weight and 
reserve power the American cars are superior in economy. Due to high 
cost and taxation, European design has tended to attempt to secure high 
mileages by reduction of weight and reserve power. The demand of 
American car users, partly due to the poor condition of roads, has called 
for heavier weight and greater reserve power of average American cars. 

Our best information indicates that a majority of 1-ton cars in the 
hands of average drivers actually cover not more than 16 miles per gallon 
of fuel. If these same cars were more carefully designed and provided 
with more satisfactory means for supplying the correct fuel mixtures, 
we are convinced that under the same operating conditions they would 
average 20 miles per gallon instead of 16, and that a further improve- 
ment of at least 25 per cent would be possible: through more careful 
operation by drivers. . 

The fuel waste in commercial vehicles seems to be even worse. Some 
fleets of commercial vehicles weighing about 4 tons, including load, aver- 
age only 5 miles per gallon of fuel, while others of equal weight and in 
about the same service average 12 miles per gallon, the differences being 
due partly to differences in design and equipment and partly to differences 
in the care with which the various adjustments are made and the opera- 
tion of the vehicles is conducted. 

Excuse for Waste. It should be noted that the automotive industry as 
it exists in this country is only about 10 years old. Not only have most 
of the engineers and manufacturers been trained in that brief period, but 
the rapid expansion of the use of motor vehicles has introduced new and 
untrained drivers at the rate of about 1,000,000 per year. The produc- 
tion of vehicles which meet the demands of these untrained users has 
made the building of really economical units doubly difficult. 

Gasoline waste depends partly upon the quality or volatility of the 
fuel used for the reason that the volatility affects its adaptability as a 
fuel for the engine consuming the greater part of this product.. But the 
greater the quantity of gasoline made from a barrel of crude oil, by any 
given process, the lower the volatility. The best interests of the public 
as well as of the automotive and oil industries will plainly be best served 
by obtaining a maximum amount of satisfactory fuel from each barrel 
of crude. 


126 OILDOM: ITS TREASURES AND TRAGEDIES 


Summary of Factors Promoting Motor Fuel Economy. Several fac- 
tors which promote fuel economy may be summarized briefly as follows: 

(1) Universal adoption of means for mai.itaining the engine and the 
carbureter and intake system at the best operating temperature. 

(2) The adoption as rapidly as possibi2 of carbureting devices which 
can’ be adjusted once for all by the maker tu supply automatically a cor- 
rect amount of fuel as completely atomized as possible for economical a 
ation under all conditions. 

(3) An economically correct grade of gasoline supplied uniformly 
throughout the country, but suitably varied, if possible, to meet climatic 
conditions. Uniformity of fuel would go far to make possible the adoption 
of the more economical carbureting systems suggested above. 

(4) Education of the user of motor vehic:es to the advantages which 
will accrue to him through fuel economy. These advantages are in reality 
much greater than the saving in fuel cost. They include also less wear 
in the engine, less carbonization, less upkeep ccst, and freedom from 
other minor annoyances. 

(5) The gradual adoption of engines using higher compression parle 
with resulting higher fuel economy. This can be accomplished only as im- 
provements in design or in quality of fuel make higher pressures possible 
without engine knock, which at present limits the useable compression 
pressures. 

(6) Servicing of automotive equipment to maintain it in satisfactory 
condition for economy of operation. This refers to the entire vehicle as 
well as to the engine, and present conditions can be improved by. educa- 
tion of the public and of the garage mechanic, and by improvements in 
the service facilities offered by the dealers. 

All of these factors, except, perhaps, the education of the general 
public, are receiving a continually increasing amount of study by the 
Society of Automotive Engineers and the manufacturers, and we believe 
that much has already been accomplished in eliminating fuel waste. The 
necessity of meeting popular demands inconsistent with economy, and the 
difficulty of putting new developments into immediate production have 
‘retarded this accomplishment. Even more important, perhaps, is the 
fact that the average vehicle now in use is a product of two or three years — 
ago, not of today. 

‘Auto Suggestions’’, Practical Helps for Winter Weather. Most autos 
are used 12 months in the year. They must be given special care during 
the winter months or they will deteriorate. Here are a few tips: (1) 
Change the oil (for lubrication) every 250 miles since the danger of gaso- 
line passing the pistons and. diluting the crank-case oil is then at maxi- 
mum; (2), increase the charging rate of generator, lights and starter being 
used more in winter; (3), adjust carbureter to cold weather conditions so 
as to enrich the mixture; (4) thin out the oil in the rear axle and 
transmission by adding cylinder oil because cold, thick oil will not reach 
the bearings or gears; (5), have a set of tire chains always ready; (6), 
keep brakes evenly adjusted, for if one wheel is tighter a bad spill may 
result; (7), put alcohol in radiator, renewing it as needed till late 
spring.* 3 

*Compiled by R. K. Jack, chief engineer, Olds Motor Works, and abstracted in 
the Washington Daily News,.October 22, 19238. 


OILDOM: ITS TREASURES AND TRAGEDIES 127 


Pi 


1. Safety Education 2. Adequate Playground: 


3. Jail for 4, City Planning 5. Traffic 
Speeders Regulation 
FIVE WAYS TO PROMOTE SAFER STREET AND HIGHWAY TRAFFIC 


According to “Facts & Figures’, 1923, published by the National Automobile 
Chamber of Commerce, Ine., 368 Madison Ave., New York. This organization offers 
annually 8 prizes for teachers and 3 for pupils. For information write to the Highway 
Education Board, Willard, Bldg., Washington, D. C 


THE SAFETY ESSAY WINNER IN 1922 OUT OF 400,000 ELEMENTARY PUPILS 


Stanley U. Newcomb, then 13, was given a gold watch and a trip to Washington, 
where he was photographed on the steps of the Capitol between Mr. Coolidge, Vice- 
President at that time, and Mr. H. C. Johnson, Superintendent of Schools at San 
Diego (the home of the author). The others are: C. B. Dodds, Sec’y to Sen. Short- 
ridge of California: and Stephen James of the Highway Education Board, at the left; 


C. L. Bawden of the U. S. Bureau of Education and N. C. Damon of the N. A. C. C 
at the right. 


? 


a 


128 OILDOM: ITS TREASURES AND TRAGEDIES 


WINNERS OF H. S. FIRESTONE SCHOLARSHIPS FOR GOOD ROADS 


ESSAYS 
Kansas, one of two states that do Kentucky, known for its fair women 
not derive funds for aiding Federal and fine horses, fittingly brought 


highways from auto license or gaso- forth one of these winners—in 1923. 
line tax, supplied the successful con-. Miss Dorothy L. Roberts, then’ of 


iNet O22 5 ig 
ee eae a Ge ee Harlan, in the heart of the Kentucky 
Mountains, is now enjoying her 


Lindsborg lad and son of the author 
of ‘‘Surface Marks of Oil Deposits” $4,000 scholarship at Marietta Col- 
lege, Ohio. Her subject was, ‘“The In- 


(see. Chap. II), is now enrolled in 


George Washington University after 
graduating from Hastern High School, 
Washington. 


‘fluence of Highway Transport upon 


the Religious Life of My Community” 
(see extract below). 


—Courtesy of Funk & Wagnalls Co. 


“GASOLINE AND THE GOSPEL” 


To judge from this. view, reproduced from The Literary Digest of Oct. 27, 1923, 
church going in our cities is still a cherished custom, although church support takes 
hardly half the sum spent for gasoline alone. All car owners in the cities do not spend 
Sunday at the beach, in forest camp or on golf course. Great good will result from 
the growth in the use of motor vehicles in rural regions. Wrote Miss Roberts in her 
prize essay: “Good roads will encourage the auto truck, diversity of crops, improved 
farming methods, cooperative selling, contentment, and an increase of the economic 
surplus. This surplus will be invested in churches and schools. Good roads will mean 
fewer churches, but better, larger ones; fewer ministers, but better trained, educated 
community leaders.’’ 


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poomsapul P poomsapuy ' 


OILDOM 


ITS TREASURES AND TRAGEDIES 


A PROFUSELY ILLUSTRATED BOOK OF LATE 
AND BASIC FACTS ABOUT PETROLEUM AND THE 
DEPENDENT OIL AND AUTOMOTIVE INDUSTRIES 


POPULARLY PRESENTED FOR THE BENEFIT OF INVESTORS, MOTORISTS 
AND OPERATORS 


By Oscar H. REINHOLT, B.S. 


Engineer and Geologist; Specialist in Mineral Resources; Co-Editor, Revised ‘‘Manual for 
the Oil and Gas Industry.’”’ United States Treasury Department, 1921; Member, 
American Academy of Pol. and Soc. Science, American Institute Min. 
and Met. Engineers, Geological Society of Washington, D. C. 

Eighth International Geographic Congress 


PART TWO 


Covering Finance, Geography, Governmental Relations, The Human 
Element, Latin America and the Prevention of Failures 


David McKay Co., Publishers 
South Washington Square, Philadelphia 
Price, $3.00 postpaid. 
Price of both parts in one binding, $4.00. 


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Copyright 19 
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27 by 


PUBLISHER’S STATEMENT 


In presenting to the public this long expected second part of Mr. Rein- 
holt’s unique work, a few explanatory words seem called for. 


Part Two is complete in itself and does not demand previous acquaint- 
ance with Part One for its understanding, enjoyment and utilization. In- 
deed, this is largely true of every chapter in both parts; each is more or 
less an independent treatment of one phase of the almost fathomless sub- 
ject, Oil; any one of them, without the others, may be consulted with 
profit should time or interest be limited. 


In regard to the Author’s purpose, that has been fully stated in the 
preface to Part One as the “Conservation of Capital.” He has kept this 
in mind while preparing Part Two. What shall it profit our people if the 
legitimate industry in cooperation with the Oil Conservation Board shall 
prolong the life of our petroleum deposits and, on the other hand, the 
investing public shall squander capital by encouraging inexperienced in- 
terlopers and dishonest promoters? Since natural resources may be con- 
verted into capital, Mr. Reinholt has incidentally emphasized that full 
and timely utilization of oil, while it is cheap, will indirectly advance the 
cause of capital saving. Unfair criticism has often been leveled at lead- 
ing operators and the industry as a whole. But if publicists and politicians 
had more correct information at their command most of the abuse and 
condemnation would be avoided. Some of the facts given in this volume 
invite fairer treatment of that industry which supplies efficient motor 
fuel for more than twenty million American trucks and automobiles. 

As to the exceptionally wide scope of this work the reader is referred 
to the Outline of Contents as well as to the comprehensive Index. As to 
the preparation it may be stated that the Author, in the course of many 
years accumulated a vast file of valuable oil literature not contained in 
books. From these data he has deliberately selected the best material for 
use in OILDOM: ITS TREASURES AND TRAGEDIES. He has traveled exten- 
sively for the Government and on his own account, not only visiting all 
the major oil fields in the United States and Mexico but also attending 
many conventions of engineers, geologists, producers and marketers. In 
devoting a quarter of a page to a review of Part One, the London Oil 
News noted that it appeared to be “a good and workmanlike contribution 
to popular knowledge.” As to the treatment: A topic in bold type intro- 
duces almost every paragraph, and outstanding facts clearly and con- 
cisely stated make this story of oil easily understood by the layman. Sta- 
tistics—in round figures or large units—are readily digested. A California 
critic designated Part One as ‘‘a valuable reference volume, written in a 
readable style, free from technicalities.” 


Whatever the various causes for the delay in publishing Part Two, the 
procrastination has permitted the inclusion of much interesting matter 
that might otherwise have been omitted. Deferring the issuance of this 
part to early 1927 made the contents quite down to date. Future editions 
will inform about other operators than those herein described. 


May this unusual assembly of important.facts provide substantial service 
to thinking, thrifty people who appreciate the recent truths about a world- 
wide business of greatest benefit to the American people whether considered 
as consumers, investors or workers. 


Philadelphia, January 31, 1927. 


~ 


CONDENSED TABLE OF CONTENTS 


PART ONE—FIRST SEVEN CHAPTERS 


I. THE PETROLEUM PANORAMA—International Treasures and Tragedies; World 
Reserves, etc. 


Il. THE NATURAL RESOURCE—Origin of Oil, Geological Occurrence and Distribu- 


tion, ete. 


Ill. COMMERCIAL GEOLOGY—Description of the Major American Oil Fields; 
Canadian fields. 


IV. MECHANISM OF THE INDUSTRY—Drilling, Producing, Transporting, Refining ; 
Core Drilling. 


V-VI. ECONOMIC ASPECTS—Brief History, Recent Overproduction ; Price Variations, 
Review, etc. 


VI. GASOLINE AND THE AUTOMOTIVE INDUSTRY—tThree Sources of Gasoline, 
Growth, Conservation. ( 


PART TWO—LAST SEVEN CHAPTERS 


VIII. GEOGRAPHY OF PRODUCTION AND REFINING—Treasures and Tragedies, 
Geography of Soil versus Geography of Oil, Depletion Compels Shifting in Sources, Tulsa 
near U. S. Center of Production, Los Angeles the Leading Port in Domestic Trade, Import 
Traffic of Oil Ports; World Sources, Production by Major Fields and Pools, Seven States 
More Than Five Foreign Countries, Output per Well; Oil First in the Mineral Industry of 
Many States; Petroleum in the ‘“‘Big Three’? States, California, Oklahoma and Texas; 
Production of Natural Gasoline by States; Distribution of Refineries. 


IX. GEOGRAPHY OF THE MARITIME TRADE—Preponderance of Tankers in Mer- 
chant Marine, Movement through Panama Canal, Oil in American Bottoms, Tonnage of 
Foreign Trade, Where Imports Enter and Exports Depart; The World’s Greatest Buyer of 
Crude Oil; Decreasing Imports of Crude. Position of Petroleum in Import Trade; Oil 
Great Force in Export Trade in General; Importance of Maintaining Export Trade in Oil 
Products, Mineral Oil next to Cotton, Federal Interference Proposed; Our Best Customers 
for Crude and Refined Oils; British Petroleum Trade, 1923-1925; World Consumption. 


X. LATIN AMERICA, LATENT AND PRODUCING—Leadership in Many Lines; 
Panama and Petroleum; World Trade, Trade with the United States, Oil as a Factor in 
Commerce, U. S. Imports from Mexico below 50 Million in 1926; Geologic Occurrence and 
Characteristics of Petroleum, Delayed Development, Recent Quickening, Deficiency in Coal; 
Cuba, Curacao and Trinidad; Central America, Ecuador and Bolivia; Chili, the Coal Pro- 
ducer : Brazil, the Unexplored with Big Shale Deposits ; Argentina Active at Comodoro 
Rivadavia ; Peru till Second in South American Oil, Negritos Its Leading Field, American 
Capital ; Colombia Coming to the Front with Completion of 360-Mile Pipe Line; ‘Venezuelan 
Geology, Maracaibo like California; La Rosa and Mene Grande, Venezuela Advancing 
Rapidly, Now Fourth Among Oil Nations, British Dominence ; Mexico, Land of Silver, 
Sisal Hemp and Heavy Oil; Happenings of 25 Years in Oil; World’s Greatest Gushers: 
Comparison of Mexican with American Oil Fields ; Production and Trade in Petroleum ; 
Tampico, Taxation, etc. ‘ 


XI. GOVERNMENTAL RELATIONS—Manifold Activities Helpful to Prndeeee 


Con- 
sumers and Government; Bureau of Mines and Department of Commerce; Geological Suc 
vey and Interior Department ; Governmental Needs and the Navy Department ; Conserva- 


tion Work Accomplished and Required; The Oil Conservation Board and Its First Report 
with Addresses of Leading Oil Men. 


XII. HUMAN FACTORS AND BENEFICIARIES—The Men Who Toil and Win the 
Oil; the Men Who Find through Well Trained Mind; Ladders to Leadership; Hazards and 
Heroes, Company Care, Profit Sharing; Consumers the Principal Beneficiaries, Osage In- 
dians World’s Wealthiest Tribe; How Oil Men Helped to Win the War; the American 
Petroleum Institute a Permanent Result. 


XIII. FINANCIAL SURVEY AND INVESTMENTS—A Bird’s-Eye View of the Bus- 
iness; Benefits, Assets, Who’s Who; Operating Costs and Capital Expenditures; Fuel, 
Power and Electrification ; Geological Work, Leasing, Core Drilling; Cost of Drilling and 
equipping Wells; Cost of Producing Crude Oil; Margin between Cost and Market Value; 
Valuation of Oil Properties with Data on Some Sales; Depletion and Depreciation; Current 
Supply and Demand; Financial Losses and Conservation ;: Conservation through Combina- 
tions; Larger Units Benefit Consumers and Workers, Memorable Period of Mergers, Their 
Motives, East Weds West, General Petroleum to Standard of N. Y.; Earnings of the En- 
tire Industry, Refining More Stabilized than Production, Increasing Gross Income; Income 
and Profits of Leading Operators, Gross Sales of 12 Companies, Net Profits of 26 Opera- 
tors, Net per Share, Percent Profit of Par, Dividend Rates More Regular; A Type Study 
in Oil—The Texas Company; Comparisons with Gulf Oil, Humble and Standard of In- 
diana; Other Substantial Operators; Refiners and Marketers in the Philadelphia District; 
Financing the Industry; Sudden Need for New Capital, Threefold Function of Surplus, 
Capital Increases; Making Money in Oil, Wildcatting Hazardous; Investing in Oil Se- 
curities versus Speculating; Shares of - Going Concerns, Dividends Paid in 1925; Ratio of 
Current Assets to Current Liabilities ; ; Financial Review of 1926 and Past Years. 


XIV. PREVENTION OF FRAUDS AND FAILURES—Why Rogues and Ignoramuses 
Prey on Petroleum; A Ten-Year Tale of Tragedy; General and Specific (45) Causes of Oil- 
dom Wrecks; Why Small Refiners Fail; Prevention of Failures; How to Win in Wild- 


catting; Blue-Sky Laws and Ear Marks "of Fraud; Hammond’s Ten Don’ts; Questionnaire 
of the Better Business Bureau. 


OILDOM: 


ITS TREASURES AND TRAGEDIES 


By OScAR H. REINHOLT 
PAR Te BraWE®) 


CHAPTER VIII—GEOGRAPHY OF THE DOMESTIC INDUS- 
TRY—PRODUCTION AND REFINING 


“The barrens of the Mackenzie basin and the frozen wastes of Chiltkat now vie with the 
tropical jungles of Central and South America in luring the locator of petroleum. Whether 
you describe the oil seeker as a geologist or as a scout he is also a geographer. Likewise, 
foreign sales present a further requirement of familiarity with geography. Probably in no 
field of commerce has America been so important a factor as in the world markets for 
mineral oil. In this phase of the business one must know the countries, their peoples, their 
customs of living, of doing business, and of financing operations. This takes one, not to the 
hinterland, as it does the scout, but to the capitals, the industrial centers, and the water- 
ways.’—The Texaco Star, April, 1923. 


INTRODUCTORY 


Geographic Treasures and Tragedies. There are geographic as well as 
financial tragedies attached to the legitimate petroleum industry, but they 
are trivial compared with the tragedies arising from oil-stock promotions. 
The unique shifting of the oil and gas centers of production may prove 
either a bane or a blessing. Tragedies take place in the abandonment of 
towns overbuilt because of ignorance, greed, over-optimism, or lack of 
foresight. Occasionally fertile farm lands have been more or less ruined 
by the flooding of the surface with oil from great gushers thus urging the 
owners to settle elsewhere. However, “deserted villages” do not dot the 
landscape of oildom so numerously as they do the western world of gold 
and silver Golcondas. By no means do the geographic tragedies outweigh 
the geographic treasures in oildom. The industry is becoming more and 
more one of pioneering in new or unsettled places and often leads to the 
development of other and more permanent natural resources such as coal, 
potash and water-power (see pages 30 and 63 and foot note 102). Some 
cities owe their growth if not their birth in part to the development of 
tributary territory rich in gas and oil. Pittsburgh owes largely to natural 
gas her great glass industry. Tulsa would probably not be known outside 
of Oklahoma were it not for the petroleum industry. Elsewhere references 
relate to Baltimore, Casper, Fort Worth, Galveston, Houston, Los Angeles, 
Port Arthur, Shreveport, Tampico, Wichita and Wichita Falls. 

Geographic knowledge of foreign lands has been obtained through the oil 
industry in two ways. For at least thirty years American well drillers 
have been going abroad. Their letters get wide publicity in their home 
papers, particularly throughout the Appalachian oil fields where many of 
them were trained. Also, in the course of a half century, American 
petroleum products have been carried into the far corners of the earth. 
In a double sense they have served as the “Light of Asia,” for knowledge 
of the United States has followed in the wake of illuminating oil. Amer- 
ican tankers, cargo vessels and commercial travelers connected with our 


136 OILDOM: ITS TREASURES AND TRAGEDIES 


exporting oil companies* have continually returned with most interesting 
information about distant lands. 

Geography of Soil versus Geography of Oil. The fundamental geographic . 
differences between ordinary mining and farming are not so emphatic in 
the case of oil and coal production.f As indicated in Chapters IJ and Iil 
and on pages 40 and 63-64, geologic and not climatic conditions govern the 
geographic distribution of oil and gas deposits. Farming may be followed 
but no petroleum produced in purely volcanic, granitic and metamorphic 
regions. Neither bituminous coal nor oil may be obtained from stratified 
rocks that have been violently bent and broken. Metal mining states in 
general are not noted oil producers. The few large states that yield both 
do so in widely separated sections. Noteworthy exceptions are the lead- 
zinc states, Oklahoma and Kansas, since there the ore bodies occur in 
sedimentaries. 

Depletion the One Outstanding Difference. A contrast between agricul- 
ture and the mineral industry concerns depletion. Fertility of the soil may 
be renewed, but mineral deposits once depleted are irreplaceable. There- 
fore the most striking fact in the economic and commercial geography of 
petroleum is the everlasting shifting in the sources of supply. In the course 
of a quarter century the center of crude oil output has migrated from the 
upper Ohio valley to the vicinity of the Texas Panhandle, a distance of 
about 1,000 miles. Oil pools are now more quickly developed and exhausted 
than ever before; and wild-catting over wide areas increases the number of 
new fields and pools that may be found within a single year. But petroleum 
will not forever be mined by the well method in the United States; and so 
other geographic shiftings may be foreshadowed. Many a deserted oil- 
town, with its industrial tombstones of derricks, may some day be re- 
populated when the partly depleted sands shall themselves be mined for 
their remaining oil content (pages 42-43). 

Another Geographic Difference. Agriculture is extensive, oil production 
is intensive. All states contain cultivated areas and yield farm crops of 
one kind or another; but 30 states in 1924 failed to produce any crude 
petroleum, and three out of 18 that gave forth the combustible liquid con- 
tributed three-fourths of the entire quantity. Such concentration is quite 
unique and is approached only in the production of natural gas, gold, iron 
ore, copper and zinc among the major mineral products and in the pro- 
duction of aluminum ore, borax, graphite, manganese ore, marble, phos- 
phate rock, potash and sulphur among the minor mineral products. 


DOMESTIC CENTERS OF PRODUCTION, REFINING AND COMMERCE 


Tulsa Nearest to National Center of Production. Production centers shift 
as already shown, but refining points, particularly those located at oil ports, 


* The house journals of these operators (such as The Lamp, The Texaco Star, Union Oil 
Bulletin and the Bulletin of the Standard Oil Company of California) often contain highly 
instructive, illustrated articles not only about the petroleum trade but also about other 
matters of geographic value. The photographic views in this book imply how wide a 
geographic range is covered by the American petroleum industry. 

+ Thus in regions of relatively undisturbed sedimentary rocks agriculture may persist on 
the surface while oil wells may tap the wealth beneath the soil. Texas is primarily given 
over to farming and grazing; but in the fall of 1923, and again in January, 1925, it 
temporarily took second place as a producer of petroleum. During the last four months of 
1926 the ‘‘Lone Star State’? stood next to California, and even ranked first during a few 
weeks. 


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138 OILDOM: ITS TREASURES AND TRAGEDIES 


are relatively permanent. The cities of Los Angeles and Tulsa are 
apparently tied for first honors for consideration as the oil capital not only 
of this country but of the entire world. Tulsa, like Tampico in Mexico, has 
depended almost entirely on petroleum for its great growth in recent 
years—more than five-fold in less than 15 years—so that its population now 
numbers over 100,000. Tulsa is likely less than 200 miles northeast 
of the geographic center of oil production in the United States, and in 
practically every sense is the center of the Mid-Continent, the first of all 
the seven major oil fields of this country. Here are located the homes of 
more important oil companies than in any other city of its size; and here 
was held the first international petroleum exposition during the fall of 1924. 

Los Angeles World’s Leading Oil Port. On the other hand, Los Angeles 
is less exclusively an oil city* though for the time being its Port of San 
Pedro is preeminent in combined foreign and domestic shipments of 
petroleum (see pages 21 and —). These shipments, to the east coast, west 
coast and foreign countries, at one time during 1923 proceeded at the rate 
of more than 400,000 barrels daily, or about 150 million barrels yearly. 
Before 1923 no state had produced crude oil at quite so high a rate, 

Unique Location of Los Angeles in a Derrick-decked Domain. One of the 
few well-founded boasts of both real estate and oil stock venders in southern 
California has probably never applied to any other city in the history of 
the world’s oil industry. From the hills of Los Angeles one could, during 
1928, look out over the slopes and lowlands from the Puente Hills to the 
Pacific beaches and discern the derricks of fewer than 4,000 wells from 
which was flowing collectively a quantity of petroleum so immense as to 
make for the entire year of 1923 more than 20 per cent of the world’s total 
and almost 30 per cent of the total for the United States. Nevertheless, 
and in spite of the author’s attachment to his former home city, it must 
be admitted that Tulsa is geographically the oil capital of our country as 
acknowledged by a majority of oil men. Both California and Oklahoma 
have other cities that are very important in the oil industry, such as 
Bakersfield in the former and Bartlesville in the latter. 

Many Municipalities Dependent on Mineral Oil. Houston, in Harris 
County, has grown a little faster than the other three largest cities in 
Texas largely because of its proximity to the Gulf Coast pools. Neither 
Dallas nor Fort Worth are quite so near to producing fields. San Antonio 
has its Somerset on the border of Bexar County, but it is about as distant 
from Luling as Dallas is from either Powell or Wortham. Wichita Falls 
is unquestionably the headquarters of northern Texas—Burkburnett, 
Electra, and Holliday, as Corsicana is for East Central Texas—Mexia, 
Powell and Wortham pools. Wichita is the logical oil capital of. Kansas, El 
Dorado of Arkansas, Shreveport of Louisiana, and Casper of Wyoming. 
In the case of states east of the Mississippi it is not an easy matter to 
select the various state centers of production. Lima, Ohio, is the admitted 
commercial center of the Trenton or Lima-Indiana field, but Toledo is the 
leading refining center of the state, its four refineries having over twice 
the capacity of the two at Cleveland or three times the lonely one at Lima. 
Los Angeles, Oil City (Pa.), and Pittsburgh are prominent in the manufac- 
ture and distribution of oil field equipment; so also Parkersburg, W. Va. 


* See “‘Petroleum Refineries in the United States,’’ November 1, 1924, January 1, 1926, 


published by Bureau of Mines, recently transferred from the Interior Department to the 
Department of Commerce. | 


OILDOM: ITS TREASURES AND TRAGEDIES 139 


Los Angeles the Most “Refined” Metropolis. In point of refining capacity 
only five of the first fifteen refining centers are known nationally outside 
of the oil fraternity. Bureau of Mines data show that the 12 leading refin- 
ery cities, each with a daily capacity of about 50,000 barrels or more, are 
as follows: Port Arthur, Tex.; Bayonne, N. J.; Richmond, Calif.; El Se- 
gundo, Calif.; Baton Rouge, La.; Vernon, Calif.; Wilmington, Calif.; Phila- 
delphia; Whiting, Ind.; Tulsa and West Tulsa; Casper, Wyo.; Wood River, 
Ill.; Avon, Calif.; Baltimore, and Los Angeles. El Segundo, Vernon and 
Wilmington may all be considered as suburbs of Los Angeles; and if the 
combined capacity of the scattered plants throughout southern Los Angeles 
County be included, then Los Angeles is now the leading refinery center of 
the world, with a total potential of about 375,000 barrels daily. This made 
half of California’s total or one-eighth of the national capacity, May 1, 1925. 

Import Traffic of Oil Ports. While Port Arthur (including Sabine Pass) 
is the most exclusive oil port in the United States, Galveston stood at the 
top during the past year (1924) in the matter of crude oil imports. The 
figures following the names of the ports indicate in millions of barrels the 
receipts of unrefined oil from foreign lands: Galveston, 19; New York, 17; 
New Orleans (including Baton Rouge), 15; Port Arthur (including Sabine 
Pass), 7.5; Baltimore, 7; Boston, 5.5; Philadelphia, 5; Tampa, 1.6; all others, 
12; total, practically 90,000,000 barrels. However, the aggregate water 
receipts of crude oil at the port of New York in 1924, including those from 
California (80,000,000 barrels), reached the quantity of 47,000,000 barrels, 
or nearly three times the total receipts at Galveston, which did not get any 
oil from California. 

Export Traffic of Oil Ports. New York is still supreme in the quantity 
and value of refined mineral oil exported. But in the quantity of crude, 
topped and refined petroleum carried away by water to both domestic and 
foreign destinations San Pedro, the port of Los Angeles, has “lassoed” the 
world leadership for a few years at least. With new discoveries near 
Tampico, in time that foremost Mexican port may recapture her queenship 
in petroleum shipments.* 


PRODUCTION OF CRUDE OIL 
1. WORLD SOURCES 


Tremendous Total to End of 1924. During the past two-thirds of a cen- 
tury the entire earth has produced over 12,000,000,000 barrels of oil. To 
visualize this large amount of liquid it may be stated that to run the same 
volume of water would take the Potomac at the “Niagara of the South” 
about 185 days or four and one-half months at its summer rate of flow 
(compare page 61). Practically all came from countries located north of 
the Equator. Two-thirds of the huge total emanated from the United 
States in the course of 65 years. One-sixth, or 2,000,000,000 barrels, origi- 
nated in Russia, beginning about 62 years ago. A little over one-tenth— 


*In regard to combined outbound and inbound water-borne traffic the five foremost sea- 
ports in 1924 handled cargo tons of 2,240 pounds as follows, in millions, according to the 
Chief of Engineers, U. S. Army, and published January, 1925, in Southern California 
Business, organ of the Los Angeles Chamber of Commerce: (1) New York, 48; (2) Los 
Angeles, 27.2; (3) Philadelphia, 15.2; (4) New Orleans, 10.3; (5) Baltimore, 10.2. The 
figures for 1922, on page 20, are exclusive of coastwise or domestic traffic. Petroleum is 
_ still the most important commodity considering quantity alone, in the foreign trade of 
those cities. 


140 OILDOM: ITS TREASURES AND TRAGEDIES 


1,200,000,000 barrels—came out of the ground in Mexico in hardly a quar- 
ter of a century. The significant facts are these: Nearly half of the 
world yield to date was obtained during the past eight years, or in one- 
eighth of the total time in which it has been producing; half of the output 
of the United States was gotten in the same period; but two-thirds of 
Mexico’s mined mineral oil was produced during the five-year period, 1920- 
1924. (See pages 14 and 19.) 


1895.2" 1900 SssIGtS es (310 ISIS 1920 1924 


Current Output of Leading Countries. All geographic units contributing 
half a million barrels or more of crude oil in 1924 are listed below, the 
figures representing millions of barrels. It will be observed that the United 
States produces more than twice as much as all the rest of the world. 


Per- Per- 

cent cent 

Country 1923 1924 1924 Country 1923 1924 1924 
United ‘Statess...: 2s. 7385 718 70.6 PPerd fg wi oer ences 5.7 182 BOE8 
Mexicoperien «sci 150 140 13.7 Poland (Galicia)..... 5.4 5.7 6 
PRUSSIA ie eee etme e 39 45 4.3 British Borneo....... 3.9 4.5 A 
Persiacgee setae 29 32 But AM ME GNCCES YE les ae ay a ce 3.0 4.3 A 
Dutch E. Indies...... 20 Zi 2.0 ATSeNtINAS se tor circ aie 3.4 3.8 A 
RUMANIA olen s 10.9 iRee: 1.8 JAD AMI alerccersrsn crete 1.8 1.6 ae 
W EneZuela ices sie as 4 9.5 mm!) HWSVOt Sete eevee wee 1.0 Ld l 

Indias yee. Ree oetle 8.3 8.2 8 Colombia= s.n.ot cee ce A .5x -05 


The United States apparently passed its peak in 1924, the first year since 
1906 to show a loss, but 1925 and 1926 set new records. Mexico lost 
in 1924 as much as the next three countries gained. Rumania gained 
twice as much as the Dutch East Indies. But the big surprise was Vene- 
zuela which more than doubled her output in the course of twelve months, 
rising in rank from tenth in 1923 to seventh in 1924. Colombia managed 
to keep her place as the sweet sixteenth just ahead of France. The year 
1925 led to further changes, such as Peru passing India and Venezuela 
outranking Rumania. Venezuela became fourth in 1926. : 

New Peak in 1925; Gain of 50 Million. Unexpectedly the United States 
surpassed its 1923 peak of 735 million through an increase of 50 million 
over 1924. “This boosted the world total by little more than the same amount 
making the output of all countries in 1925 fully 1,065 million barrels, and 
increasing our contribution from 70.5 percent to 71.6 percent. South 


OILDOM: ITS TREASURES AND TRAGEDIES 141 


America’s advance failed to offset Mexico’s loss of 25 million barrels. The 
1925 order of producing nations appears as follows: 


Million Million 

Country ' barrels Pct. Country barrels Pet. 
Wnited (States? ccs se. 764 71.6 ANGEN CINE meets yuk Neve) eee 6.5 6 
MexicOt arcu os he ets 115 10.8 Polamdaccteteci. oc coe 5.7 5 
EMUSSIL, rercteldiere c'est © 6s i0;0 52 4.9 Bry _ Borneovusscsccciun 4.3 A 
PSreiee tests dicic <beieers cate 34 3.2 PEINIOAG™ has se. «ce siete <0 4,3 A 
Duten his Ind... send « 22 2.0 ADAN Morera. sheds o oictorantes 6 2.0 a? 
V CNEZUCI Aen, lccecis see's ove 20 1.9 HIS VD Uwe eeictois cicis cierale opatats i? 1 
RUNGATT tele ate oleere siete sie: 16.1 1.5 Columbia, sac ceecees oes 1.0 1 
iP OT netertete orc b cies ere este 1 a) EUVANCOE Ss aweure evete a0s,elecstehs ie 5 04 
PVC meierneres sss eieiears'< a:e 8.0 8 Germany i. 6 jee oecineeres 4 04 


Canada, due to a “gasoline” well near Calgary, contributed more petroleum than all the 
rest of the world not included above. 


2. DOMESTIC SOURCES—THE MAJOR FIELDS AND POOLS 


Production by Major Fields. During the past decade the Mid-Continent 
field has been contributing fully 50 per cent of the annual output of‘crude 
oil in the United States. The leadership of this large area is more pro- 
nounced on the basis of value. This is due largely to the fact that the 
average quality of the oil is superior to that generally produced in Cali- 
fornia, the next most important geographic division of first order. 


Millions of barrels Percent of total 

Field 1921 1922 1923 1924* 1921 Tals ae 1923 1924 
Mid-Gontinerit, i....:0 0 «so 258.5 311.0 348.5 368.7 54.8 55.8 47.5 52.0 
CAMLOLIIA Gree sce Sites cote 112.6 138.5 263.7 230.1 23.8 24.8 36.0 32.6 
Rocky Mountain........ 21.0 29.3 47.6 42.8 4.4 ee 6.5 6.1 
Gili COasbstomctcnrers o/s eres. 36.4 Biinll 33.3 27.6 Hat 6.7 4.5 3.9 
FADDAlACHIAD toile siersie c 21s 30.5 29.2 28.2 27.0 6.5 bee 3.9 3.8 
Illinois-S. W. Indiana... 10.9 10.2 9.5 8.7 23 1.8 1.3 1:3 
Lima-Indiana (Trenton). 2.4 2.3 2.4 2.3 5 A 3 3 


ee —_———_—_-_- ——— —————— ———— 


472.3 557.6 733.2 707.2 100.0 100.0 100.0 100.0 


The first two fields have a current control six-sevenths, or well above 
80 per cent, of the total. By reason of their huge reserves (see page 39) 
they may still be yielding 70 to 75 per cent of the total towards the middle 
of this century. Notwithstanding the hitherto known advantage of the 
Gulf Coast field in the matter of reserves it is doubtful if it will displace 
the Rocky Mountain region in third rank for many years in view of the 
recent discoveries in Colorado, Montana and New Mexico. Since produc- 
tion began and up to January 1, 1925, the aggregate output, in millions 
of barrels, may be considered to be as follows for each of the seven major 
fields: Mid-Continent, almost 3,000; California, nearly 2,100; Appalachian, 
almost 1,400; Gulf Coast, 500; Lima-Indiana, 465; Rocky Mountain, 225; 
Illinois-S. W. Indiana, 360. 

Production by Majer Pools. Of pools in the United States yielding a 
daily average of 15,000 barrels or more there were 29 in January, 1925, 
or five more than 12 months before. Their combined output made 63 per 
cent of the country’s total compared with 68 per cent in January, 1924. 
This evidences the falling off in the flush production of the eight major 
pools, all of which reached peak output above 100,000 daily each during 
1923. In other words, to maintain production without more than the two 
per cent decrease in the complete total, about 718,000,000 barrels in 1924, 
required a greater number of pools. During the past year (1924) Burk- 
burnett dropped behind; likewise three temporary major pools of that year, 
namely Graham-Fox and Stroud in Oklahoma, and Richland in Texas. 


* Preliminary figures of the U. S. Geological Survey which will be increased about 1 per- 
cent later to include oil used in drilling, etc., where produced. 


142 OILDOM: ITS TREASURES AND TRAGEDIES 


Among more permanent major pools added during 1924 were Coyote and 
Dominguez in California, Cromwell and Papoose in Oklahoma, and Luling 
and Wortham in Texas. The following table gives the average daily 
yield in barrels for each of the 29 major pools during Beas 1925, also 


the average gravity of the oil in degrees Baumé. 
Average daily ze Average daily 


Per Grav- Per Grav- 
State and poo] Total well ity . State and pool Total well ity 
Arkansas: Oklahoma: 
Smackover* ...... 78,180 Sieov2o.0 Tonka wasn wen ee 96,334 132.0 42.0 
California: Cromwellitis. sue 33,147 132.6 38.5 
ROSECKATIS eet Wem ces yr enea Ie eianaratane 38.3 Papoose. eisieieenn 2 35,257 446.3 38.5 
Santa Fe Springs... 39,554 139.6 43.5 Cnehiinitt oso ae 23,367 9.0 38.0 
Dominguez ....... 56,982. 1,295.0 $81.5 Burbank secs ae. 58,644 34.0 37.5 
Long Beach: :.:. 0: 122,297 229.0 25.0 Bris tows sacs seks 28,153 19.4 34.0 
Montebello: ....¢. 2. 19,428 123.0 24.0 Hewittiinie wicca 16,246 20.5 33.0. 
Huntington Beach, A1,673 134.9 23.0 Healdton*” 22... 02 15,548 8.1 30.0 
Midway-Sunset* .. 105,918 SO PaaS: Texas: ' 
SOU Fen S BBN Kae ea tines 37,019 PALS? 2:0 Worthan ances 113,336 792.6 39.0 
MOvVan@e eerie sak 41,788 17.9 22.0 Holliday ese gies 36,298 23.7 39.0 
Coyote ka. weno 20,242 88.4 22.0 Hlectra; sae, see 17,587 Leese 
Coalinga ce soe 22,402 218 e160 Powell)... degee eas 59,301 78.9 387.0 
Kerns River™ i.e LIN SS ya Ie Mexia ey See 20,439 43.3 36.0 
Louisiana: Gialine see. eee 30,720 91.7 30.0 
Haynesville ....... 15,184 DD Mca anor — ce 
Wyoming: ; Total, 29 pools.. 1,284,332 45.6 
Saltie@reckewe ies SG, OOS eae bie es eo 


Smackover smashed all American records for a daily production of a 
single pool during the week ended May 16, 1925. The average daily deluge 
climbed to the unheard of high level of 481,000 barrels. This was nearly 
90,000 barrels above the best week’s average for daily output of either 
Powell or Santa Fe Springs in 1923. 

Late Rank of the Leading Pools. Wortham, in Freestone County, Texas 
attained the temporary leadership in January, 1925. Almost directly it 
‘dropped behind both Long Beach and Midway-Sunset of California. Its 
peak of 167,000 barrels daily, as well as the earlier and greater peaks of 
Powell, Santa Fe Springs, Cushing and Long Beach, was completely 
eclipsed three months later by Arkansas’ sensational pool, Smackover. 


RELATIVE RANK OF LEADING AMERICAN POOLS EARLY IN 1926 AND MIDDLE 


OF 1925 
(Average daily yield for two weeks given in thousands of barrels) 

June, Jan., June, Jan., 

Pool or field 1925 1926 Pool or field 1925 1926 
pimackover: Arkywengene wei. 265 170 Garber;cOklacics saan eee oes Soe 31 
Tiong Beach seu eae ieee 108 SONA Archer“Co:,) Pex. 2 tena oak 40 30 
Midway-Sunset ics soc 104 93 OOAU oe GEOR Irena yA anya Ue abs SMEs 38 30 
IMPS WOO dae Gi eis sais eee 78 60 DOMINGUEZ 2 i. eee eee ou 24 
Salt Creek, Wyo. i. ccc. es 55 60 Rosecrans. ee ee 23 24 
SantaHe Sprines.4.. wee. 52 51 Gushing “Oklas.2in3 tae eee 22 22 
Huntington Beach.......... 44 “A6 ling | eSo.oWe-Texase oom 24 21 
Burbank; Oklany 320s ee: 57 45 Ventura-Newhall .......... 24.5 UR 
Tonkawa, Okla... neue ae 58 43 Coalingans Hye eg Ss 21 we 
Corsicana-Powell, Tex....... 47 34 Coyote Po aca cece s oie ees 21 apiste 
Biocelake swe plex ves dey tee 30 33 Davenport, Okla............ ats 20 
FLOP EAN CE eis se eee eons 36 82 Cromwell,-Oklaves secs tones 35 20 
Bristow-Slick, Okla......... 35 32 North Okmulgee, Okla...... 18 


3. DOMESTIC SOURCES—THE INDIVIDUAL STATES 
Noteworthy Changes in Yearly Yield. During the year 1924, California 
broke the record for fall in annual output. The loss was enormous, amount- 
ing to more than 30 million barrels. No foreign country—except Mexico 
in the year 1923—-ever sustained so large a loss in a single year. This 
quantity even exceeded the tremendous total of about 20 million barrels, 
which measured the decrease in crude oil output for the entire country 


* Rearranged from table in The Oil and Gas Journal, March 5, 1925. Pools marked 
with an asterisk have a remarkably steady rate of yield, though low per well. Except 
Cushing and Electra, all of these produce heavy oil. 


143 


ITS TREASURES AND TRAGEDIES 


OILDOM 


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O61 TO61 206I 


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OILDOM: ITS TREASURES AND TRAGEDIES 
COMPARISON OF FIVE LARGE PRODUCING AREAS 


144 


G)- 


1 
ak oh 
ney lia Se 


| | el 
SEay 


aaa 
ite 
y 


| | 
ae 
5 
See 
lg 


Sannnae 


- 


ae 
BSR Sr aR 


BURBANK 


Peak prod 12/ 164 66/5 


iy ae RSleL 
le, tees 
peal rac ela 


rel aie Shige so bes |ee esa 


Ee 
Bi 
Ee 


ee 
z 
Be 
|_| 
a 
Vs 


< prod-112,292 bbls. 2 
a I Jan 24- 99.900 bbls: 

Tal”: mn 24-99. "2 : 
iA r | 


4a 
Ait 


. y\ 
BRBCE? 


SAGES aascr 
nde.” 


aFCROMWELL 


Peak prod 63497 bbIs. 
Prod. Jan.24- 31,500 bis. 


Phebe 


BaBnmee 
naauneoees 
REP elses 


S, 


0 


renee 


ist 
ies Wd a 
“EeeEEREE EEE 
iN TCLs 

BASS Rane es 


The above interesting Ulustration of the comparative area 
published through the courtesy of the Sinclair Consolidated 


aeeees 
ele 
Ree 


and contour of five of the big Mid-Continent Oil Fields is 
Oil Corp. The engineer who made the drawing marked out the 


very sections occupied by the Burbank Field in Townships 
Counties in Oklahoma and the exact area in Township 12-8, 
The long and narrow Powell Field in Navarro County, Texas, 
string” area of Wortham, in Limestone and Freetone Counties, 
two Oklahoma fields. 


27-5, 27-6, 26-5, 26-6 in Hastern Kay and Western Osage 
Seminole County, Oklahoma, occupied by the Cromwell Field. 
shaped like the war club of a caveman and the smaller “shoe- 
Texas are drawn in exact shape, and on; fhe same scale as the 
The comparative shape and size of the Tonkawa Field in 


to the original map, the southwest edge of the field having 
from the true contour of the Burbank Field. : 


Southern Kay and Northern .Noble Counties has been added 
been necessarily outlimed tn white so as not to take away 


in 1924. In fact, the change in California’s contribution not only surpassed 
the total loss sustained by the United States in 1924 by the approximate 
amount of Oklahoma’s increase of 10 million barrels, but it alone accounted 
for the first decrease in this country’s yearly yield since 1906, when the 
loss was a little less than eight. million barrels. The increase in 1925— 


50 million over 1920—can be credited to three states almost entirely: Arkan- 
sas, with a gain of 29 million; Kansas, 9.5 million; and Texas, 8 million.* 


* Only three states have ever registered a greater gain than 29,000,000 barrels in one 
year: California, 125,000,000 in 1923; Oklahoma, 35.6 million, 1922; Texas, 31.4 million, 
1919. In 1917 Kansas increased her output of crude 27.8 million, or very little less than 
Arkansas in 1925. California’s increase in 1923 was two and one-half times the whole coun- 
try’s gain in 1925, and 10,000,000 more than Mexico’s output in 1925. California’s loss of 
over 30,000,000 in 1924 approximated Persia’s current yearly yield. The gasoline content 
thereof could operate 1,000,000 automobiles 12 months. 


OILDOM: ITS TREASURES AND TRAGEDIES 145 


TYPICAL TOPOGRA- 
PHY OF THE TEXAS 
PANHANDLE 


Development in 1926 
was so accelerated that 
daily yield reached 167,- 
000 bbls. during a Novem- 
ber week. Hutchinson 
County has contributed 
over 90 percent to the 
output of the Panhandle, 
the leading American field 
at the end of 1926. 


—The Oil & Gas Journal. 


Texas Temporarily Takes First Place. A prophecy of F. Julius Fohs 
has come to pass. During the Fall of 1926, in different weeks, Texas led 
California in daily production. According to The Oil and Gas Journal, the 
average daily during the week ended October 16 was 615,000 bbls. for Texas 
and 608,000 bbls. for California. On Tuesday, October 9, the Oklahoma. 
output reached 508,000 bbls., the first time that it had passed the half- 
million mark since December 20, 1924. Late in 1926, the approximate 
order of the 11 leading fields in the United States was as follows: Hutchin- 
son County, Tex., Panhandle; Smackover, Ark.; Seminole, Okla.; Long 
Beach, Calif.; Midway-Sunset, Calif.; Spindle Top, Tex.; Huntington Beach, 
Calif.; Ventura, Calif.; Burbank, Okla.; Santa Fe Springs, Calif.; Salt 
Creek, Wyo. Their daily rate ranged from 45,000 to 150,000 bbls. 


LX PENNSYLVANIA’S 
~ |ANNUAL PRODUCTION OF CRUDE OIL IN THOUSAND BARRELS PER COUNTY 


| BASED ON DATA FROM DEPARTMENT OF INTERNAL AFFAIRS, COMMONWEALTH OF PENNSYLVANIA 


O) ea a ae ANG CS Se Sa Ee NR Allie en ees ea ee oe 
; = ractfor as xy! 
a se eee a | C. z7) \ | 
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hee tees re 116 4 } LS TAR eed Ere 
| @p te 1&4 | ay Yet os - Or 
ar ae BOM gion” oe me fs NY oath ENT 2 b ny. 
oes af 73) he fe | cLearrieco % is can ef Wh ‘et S Ku BN aes 
| 32 | sek 9) Ge) rd \—-F o* (4X a eee a in 
Pree SF. 2, | | ; cy 1f 2 +i Megna eM 3 4, = Ce a 
726 1° R35" US RN ee ae rae Soak aN ren OO 
: pete SAS deb RAE ae OS Re ee aie 4 TASC MUYLKELL 
‘Va anna ay 3 eo on ea eee pes tea ogy Me. Bt E ay 
Ewe $98 S| an / ; oo les € « we See a Paw Bs ea Wak 
ALLEGHENY: CAMBRIA ( prai ry * aS ay ee lA 7 a oer 
| iper (46) Pitpdburgh ~ nf (7-2) | (0.2) OMe 2 he es a x Yo a LoS e E.R & Ss Pee 
~Sy! WESTMORELAND es os ii "0, a rages Bie ag a» {ny ; 
| IF ~& (23) vy facet ei " sf ee: mM Ds eee 4 4 Bea ee <3 Ann," 
| (22. 6 see a ye / - 4 is, Sense R canoer cee. 4 as Y. 
ey ae / ey aS LANCASTER © 3 
Le ‘ Z ee Tok ) cuestER 
ij / G2) \raverre/ SOMERSET BEDFO y Sai > - 
| GREENE é Gy) / Zo) | 0.6)» ruston] rranncin.| \ eRe. Be A, f ro 
| 4 c ss j i f ee ahd \ £ Bc. 
ee et ls ee ts Ee a ie ee ee aware on 


The data shown here are for the year 1920. (A7gures in parenthesis show million tons Bituminous Cog! produced jn 1920) 


PENNSYLVANIA, THE PIONEER STATE IN AMERICAN PETROLEUM, 


In 66 years has produced more crude of Pennsylvania grade than all other (Appalachian) 
states—almost 800 million barrels, and believed yet to have reserves of 600 million more recover- 
able by modern methods. Much of this excellent grade is still being sold below cost. Production 
rate remarkably settled, around 7% to 8 million bbls. since 1911, now making 1.2 percent of 
the nation’s annual yield and giving the ‘‘Keystone State’ eighth place in 1926 «mong all oil 
states and first among those east of the Mississippi. This state is distinguished further for: 
(1) Its great number of live wells, nearly 80.000; (2) lowest average yield per well, hardly 0.3 
barrels daily; (3) low hazard in drilling, only 12 percent dry during period 1914- 1918 (when 
10,889 wells were drilled); (4) long life of individual wells, some over 50 years (see Chap. 
XIII) ; ; (5) greatest mileage of pipe lines. During 1879-84 the Bradford pool was producing 
almost two-thirds of the world’s petroleum; in 1926, through its rejuvenation, one-third of 
Pennsylvania’s 9 million bbls. per annum. (The smaller figures not within parenthesis repre- 
sent million tons of hard coal mined in each county, 1920.) 


146 OILDOM: ITS TREASURES AND TRAGEDIES 


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VENANGO COUNTY YIELDS | 
ONE-SIXTH OF PENN- 
SYLVANIA’S OIL 


This county, containing Oil! 
City, ranks next to McKean, 
which contains the celebrated 
Bradford pool. The view is of 
“Big Injun’” well, oldest pro- 
ducer in Venango County. It is 
on the Plummer farm, Bullion 
field, 24,miles from Clintonville. 
Its initial yield, Sept., 1876, was 
8,500 bbls. daily. Present rate 
is only two-thirds of a barrel. 
The pumping jack is shown be- 
tween the Author at left, and 
Supt. Fleming, of the President 
Oil Co., Embleton. 

—Texas Star. 


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OILDOM: ITS TREASURES AND TRAGEDIES © 147 


Seven States Outrank Five Foreign Countries. Seven states west of the 
Mississippi produced together in 1925 almost three times as much as 
Mexico, Russia, Persia, the Dutch East Indies, and Venezuela combined. 
California contributed twice as much as Mexico and Louisiana just as little 
as Venezuela. Texas alone turned out of her wells last year 15,000,000 
barrels more than all the five foreign producers named, except Mexico. 
The per capita output of these seven states far exceeds that of all the other 
oil-producing states, particularly those east of the Mississippi. Louisiana, 
the poorest of these seven, had a per capita yield three times that of 
West Virginia, the best eastern producer. The table below brings forth 
interesting facts about these seven American leaders in crude production 
compared with the five other states that produce about 6,000,000 barrels 
or more. 


STATISTICAL DATA ABOUT THE 12 LEADING OIL STATES, 1925 
(Area in thousand square miles, population and total production in millions) 


Popula- Output, Per Per Output to 

State Area tion 1925 mile capita Jan. 1, ’26 
MUATTLOYTIPAME elitr co ae cic cite 6 a cia es 158.3 4.0 230.2 1,454 57.6 2,300 
CCG Teese) 5 cdas Bnet, ge, bce wane 70.1 22 176.8 2,520 80.4 1,820 
AWE 498 Sop, Ba RG ache ea ae 265.9 5.1 142.6 536 28.4 1,140 
SA SETISASR Ie thee oc cece ars wotheisle ete cteus 53.3 1.9 74.7 1,400 39.3 180 
MOH TSE SNM ey etates cater ad sade Seale Sesdhale’ e's 82.2 1.8 38.3 466 2123 344 
DWV VOTINE Tray setciere fers, crate + oldie alesewinns 97.9 0.23 29.2 300 127.0 200 
PALI STATIS arched eee tt anes sai Sis leveias 48.5 1.9 20.0 412 10.5 S11 
PUTT Ousepee tants ote tena ee © a « noe" dee a's 56.7 7.0 7.9 140 152 357 
PETS VIVE) (to tele el cicis lc oe sittisls Er aDek 9.4 7.8 173 0.8 760 
COTO ee Re eter aici ae ele eee 41.0 6.5 We 175 121 515 
FSONLUCK ie re minty eotts coe hara.8 86 oe 40°6 Aas 6.8 166 25%, 16 
Westenra re iniar yicst csc, ote ae otk wheres 24.2 1.6 5.8 239 3.6 344 


Fifteen Foreign Countries Two-Fifths of Sixteen States, 1924-26. Even 
omitting the three leading American oil states with which no foreign coun- 
tries compared in 1926, it may be seen from the following table that, be- 
ginning with Russia, practically every important oil nation could be ap- 
proximately matched in crude output with one of the 13 other states listed 
in the table. 


CRUDE OIL PRODUCTION OF COUNTRIES AND STATES FOR THREE YEARS, 
1924-1926, IN MILLIONS OF BARRELS OF 42 U. S. GALLONS 


Countries 1924 1925 1926* States 1924 1925 1926 * 
United States .......... Ride 168: 8 0 Califarnian cise esc. st: 229. 282 223 
UST ae a ee 140 «115 88 Oklahoma s fot ese tok 174 #178 176 
EDOM ces ines gtk veers « 45 52 62 Aire etek SOE ey a eae 185 145 162 
WeneSUElA ts ow, siay,sc0 3 9 20 35 Ariursag od. Ws Wel ce o's 46 717.4 60 
PRP OON iinet ew cigs as nie 8 « 32 35 31 Maisds eee a ay 29 38.4 42 
PURI TG sss 8 ess 13 16.6 24 Wyomite ct. chert $9,529.25 25 
Dutch East Indies...... 20.65 21.5 22 LOuisianates css eee. oe Ziti 202 ee 22 
Ly ei Se eae 7.8 ae Pennsylvania .......... 7.5 7.9 8.8 
aint oy cea ke s-os ¢ oc > 8.1 8 8 Montntia A564 e or. 2.8 4.1 8 
TAP OONtIN AE. cl miststeis, esses 4.7 5.8 7 TIWHOts ae teeter a aes lakes 8.1 7.9 7.8 
Hi te ai Beha Fc Dey ag eg i 4 5 6 OHO heii cee tre ats 6.8 Yi? Tek 
LY Cee treet ihe oie ie tone seta’s 5.7 6 6 Kentuckyicacnsitecw cee 74 6.8 6.5 
Colombian ucscteb ik oe ks 0.5 0.6 5 WestliVireinia. ...c' aes 5.9 5.8 5.9 
British’ Borneo........... 4.2 4.3 4.3 COIOLA DOM Ae ce hee eee Re A eZ 2.7 
Japan and’ Taiwan..... 2 72 1.9 IN GWE LOLs scone abe ais tine 1.5 1.7 1.9 
Bie Ores Sictans Wee, heidi s artic i Ft 12 1.3 New Mexico ........... al 1.0 1.6 


- Figures for foreign countries in 1926 are based upon estimates by V. R. Garfias, megr., 
For. Oil Dept., H. L. Doherty & Co. Those for the states in 1926 are based upon pre- 
liminary 10-month total by (Miss) L. M. Jones and G. R. Hopkins, petroleum economist, 


Bur. of Mines. Combined output of Michigan, Tennessee and Alaska was less than 100,000 
bbls. in 1926. 


_4. THE NUMBER OF WELLS AND THEIR DAILY YIELD, 1924-1925 


A Plethora of Punctures Makes the Average Low. The average daily 
yield per well throughout the United States dropped from 6.7 barrels in 


148 OILDOM: ITS TREASURES AND TRAGEDIES 


1923 to hardly 6.6 barrels in 1924. The reason was twofold: Decrease in 
total number of barrels produced from 735,000,000 in 1923 to 718,000,000 in 
1924, and a slight increase in the number of wells producing, to practically 
300,000. During January, 1925, the daily average of all the wells approxi- 
mated 1,912,000 barrels, or 6.5 barrels per well. This rate per well seems 
insignificant in comparison with 375 barrels daily for each of almost 1,000 
wells in Mexico (Chapter X). Slightly more than half of the wells in 
the United States averaged not quite 0.9 of a barrel daily during last 
January. In the three states of California, New Mexico, and Wyoming, 
the combined average was almost 47 barrels daily. Four American fields, 
Long Beach, Dominguez, Papoose and Wortham, with 800 wells altogether, 
averaged 410 barrels daily per well during January. In six states west of 
the Mississippi 28,136 wells averaged 45.6 barrels per well per day during 
the same month (January, 1925), making altogether 1,284,332 barrels or 
almost two-thirds of the total.daily yield of the 298,831 wells. 


NUMBER OF NEW AND TOTAL NUMBER OF OIL WELLS AND THEIR AVERAGE 
DAILY YIELD 


New wells Total wells Daily rate Per well 


State 1924 Jan., 1925 Jan., 1925 Jan., 1925 

Gatifornia 2. oo tewcks coals Mens oe 1,238 11,800 604,622 51.0 
INew JMeXIGO oiacs Scere evel chossretiecoleueonsteseoate BI 11 452 44.0 
IAAT KANSAS yuck relocate ie tensions 1,152 3,200 98,129 30.6 
WV. 11) Oo ote oor stevie evecare orareieians evens 599 2,700 74,903 27.7 
TOR AS Wales ations oe hole ae eT racteee 2,855 17,600 411,903 23.5 
LON GAT ate oy oie ate tal olaie maar et ohatane mileratene 104 400 7,613 19.0 
Colorado, ie rosso ee inners cre aretc elie teste cs 4 > 80 1,774 222, 
TLiOUISTANAM erccccgs wld als erete een ois oie one 170 3,300 53,677 16.3 
Oklahoma se crsienciass eke alone et orenetclereiente 4,814 62,500 483,217 View 
Kansas Peis icc elsitere cielatens arated weaeceas 650 17,200 77,194 4.5 
Kentucky tiee et orc tocstere ein ate e eitin a eee 176 12,200 18,571 1.52. 
MU GhaVeytey Mae eee Sa SACOM Bees Peete 123 16,800 21,355 TOT 
Drv rena eee crate casei been oor aod shave ne terrace 114 2,600 2,290 -88 
West“ Vareiniaa ee siciancterels cite eieio ce cietens 312 . 20,500 15,355 Ay 5) 
ODIO TE at are te rsa nama ratenateccte oheions 1,395 40,500 18,000 44 
Pennsylvania cise ne ie obedience aes 1,564 73,200 19,516 DHE 
Newel Mor kis Fis cctaccn secu ous a eitie teterers 287 14,200 3,806 2 TG 
TRENNESSEOh s Bis Sx aot weaver ene toate Tel oneauetore 3 40 10 .25 

Totals Ore Ls ctel che ssfakensec de volnaiatetanerets 16,571 298,831 1,912,387 6.53 


Comparative Rates per Well per Day. The flush rate of yield in New 
Mexico makes ten times the more settled rate of Kansas. The fairly set- 
tled pumping output of Wyoming is exactly 100 times that of New York 
and Pennsylvania. Production of the much heavier Arkansas oil is pro- 
ceeding 25 times as fast as that of the Illinois crude. Texas has a well 
rate three times that of Oklahoma or 30 times that of West Virginia. 


5. POSITION IN THE MINERAL INDUSTRY 


How the Oil States Stand. From the table below it becomes clear that 
petroleum is a big factor in determining the rank of the leading states in 
the mineral industry. Among the first 10 only one is not an oil producer, 
namely the northermost state which is noted for its enormous output of 
iron ore, 60 to 65 percent of the total for the United States. Among the 
next five but two are without oil wells, namely, Michigan which is second 
in iron ore and fourth in copper, and Arizona which is first in copper with 
usually 40 to 45 percent of the total. In the table the first percentage 
figure refers to the total value of $6,000,000,000 for the mineral products 
of the United States in 1923—a total that was exceeded only in 1920, the 
year of high prices, when the amount was almost $7,000,000,000. The 
second column gives the percentage of the total value of the crude oil, 


OILDOM: ITS TREASURES AND TRAGEDIES 149 


$930,000,000, for the same year, 19238, the latest for which the U. S. 
Geological Survey shows the derivation by states (see page 63).* 


Percent Percent Percent Percent 

State of total of oil State of total of oil 
IPN SV Vane sis «sci ale's 19.91 YAN PA Minnesotares.net. cae anaes? 2.70 nil 
OllahGwinteeiee secs ee ks 8.92 30.10 IB eG EES ay: Nes ris Phe owe On Meroe e 2.62 0.20 
WIGSGMIV IES UNIO ta ci kere sues 8.68 Pall ISATISASH settee s cece clerk ahers 2.51 4.80 
COPD Bivoh np ech) SE, eA a a 6.85 212110 MMTCHI a Sten vcroks olcsronstee ne 2.45 nil 
DOXA wimtcnetet cc cs aeet shee whee 0 aia 6.04 20.90 VG OUISTA NI Aane seccrse alata cid of crevae 1.83 3.90 
WHT Seer ivel cs oc cle ones 592 1.75 IN GW OFKy seine fa oie 1.78 0.45 
OUIOF seta © ries ois lars seve 5.73 1.83 A TIZOND watca cist clases etree 1.54 nil 
WeenGu@ky: gatas ssc a ara.e, oer. 0. 3.84 ale @e 


Importance of Petroleum in the Individual States. The position of the 
petroleum industry in the entire country has been indicated on pages 19-21, 
61-68, and 82-83. To some states, especially those without coal resources 


29 28 27 26 25 24 23 22 21:20 19 18 7 < ISelASate tt ORO e Be eG PSs rae = ' 


Howard SCEPIPREE aN Lincoln 
CECE Wea Dy eect meee aI 


om ttcchecllt tetas Sac! Seau Weeenaee cna sa 
Ttivert [feat are ra 


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16! rae Se ane, te JELD ahs _ 

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oft ff Ro cainayh cueecens 


Union 


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SCT NAT Grant] tatatte [T Feoncardied oy 6, 
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Para aepimtOeo Girton 5. Sete her lehity SSeS GEIB 89 


SOUTH ARKANSAS AND NORTH LOUISIANA IN 1926 PRODUCING AT ANNUAL RATE 
OF 80,000,000 BARRELS FROM SANDS OF UPPER CRETACEOUS AGE 


Smackover has been the leading field of the United States since April, 1925. In June, 
1926, its daily rate surpassed that of Long Beach (Calif.) by fully 40,000 barrels. In the 
last week of May, 1925, Smackover boosted the national yield to a peak of 2,347,000 barrels 
daily. Its production of over 431,000 barrels average daily for the week ended May 16, 1925, 
has been exceeded by only one other field, the Toteco-Cerro Azul in Mexico, which made 
516,000 barrels on December 22, 1921. No state or nation in the first five years of its oil 
development has produced as much (180 million barrels) as Arkansas. 

Urania, 50 miles south of the great Monroe gas field, became the prominent pool in 
Louisiana by the middle of 1926, leaving behind Caddo, Haynesville and Cotton Valley. 


Madison 


ie" 


hel DESOTO 
AG {ELD 


it. aac 


on Sabine eel let teal (| 


* Since this was written Michigan has become a producer. After 200 tests had been 
drilled at various times and places, oil.was found commercially on the outskirts of Saginaw 
late in 1925. Early in April, 1926, five wells were together yielding 76 barrels daily, just 
before the Sun Oil Co. brought ina ‘sixth well, apparently the best See The Oil and Gas Jnl., 
April 8, 1926; also in issue of April 1, ‘Michigan’ s Chance for Com’! Oil.’’ 


150 OILDOM: ITS TREASURES AND TRAGEDIES 


of consequence or without much development of other mineral deposits, oil, 
gas, and their dependent industries have become indispensable and of 
relatively greater importance than to the nation at large. Herewith are 
tabulated data about the petroleum states to show the places which oil, gas 
and natural gasoline occupy in the mineral industry. Other interesting 
comparisons could be made to bring out the relations to agriculture, trans- 
portation, per capita wealth, and consumption of petroleum products. 


Rank Millions of dollars 
in Petroleum producing Crude Natural Natural Mineral products in order of their 
value* states in 19238 oil gas gasoline values at mine, mill, quarry or well 

1 Oklahoma? eosiincsias $280.0 $18.3 $23.0 Oil, gas, natural gasoline, zinc, coal 

2, California ats 6 srctoner ene 196.0 8.5 16.6 Oil, cement, gas, clay products, gold 

3 ib =: ¢: 1c eee IR ay FOr 194.0 3.8 14.8 Oil, sulphur, natural gasoline, gas, 
cement 

4 Pennsylvania sews ss ss 25.3 25.9 2.6 Coal, cement, clay products, gas, oil 

5 West Virginia....... 20.2 24.4 8.9 Coal, gas, oil, clay products, natural 
gasoline 

6 IWiVOMINGé eiaeee eee 48.9 1.4 2.0 Oil, coal, gas, natural gasoline, gyp- 
sum 

7 Kansas ier scene ee 46.0 27 A Oil, coal, gas, cement, zinc, salt 

8 LiGUISIA NAY wo com Mawes 36.5 2.9 3.5 Oil, awe nBe, gas, natural gasoline, 
salt 

9 Arkansas it cisis tec ete 25.4 1.0 1.9 Oil, coal, gas, bauxite, clay products 

10 OHIO woe tote ee Lod 8.4 1.4 sont clay products, gas, oil, stone, 
ime 

11 Kentucloyaav.c coger 15.9 1.0 1.1 Coal, oil, clay products, gas, stone 

12 PUGWOUS eines teeta ants 16.3 6 9 Coal, clay products, oil, cement, stone 

13 ING WAG WOLK ys sou on ese ce 4.1 174 -04 Clay products, cement, gypsum, oil, 
stone, salt, sand and gravel, gas 

14 Monta natieeitecid ates ars 4.0 206 Saray eens Copper, silver, coal, zinc, oil, gold 

15 Indiana. sc ee aot 1.9 3 nil Coal, cement, clay products, stone, 


sand and gravel, oil, lime, gas 


*Rank in combined values of the three natural petroleum products. Other producers in 
1923 were Alaska, Colorado, Missouri, and Tennessee, but their aggregate output was in- 
significant—little more than 100,000 barrels. New Mexico became a producer during 1924, 
yielding high grade oil from the Hogback and Rattlesnake domes on the Navajo Indian 
reservation. California has improved its rank in value of oil and all minerals since 1923. 


A SYNOPTICAL STORY OF PROMINENT STATES 
THE STATE SUPREME IN CRUDE PRODUCTION 


California Leads All Foreign Lands. No outsider, not even Mexico at 
its maximum in 1921, ever produced as much mineral oil in one year as 
California did in either 1923 or 1924. This state contributed 25.8 percent 
to the world output of petroleum in 1923, and 23 percent in 1924. Cali- 
fornia’s peak of practically 263,000,000 barrels in 1923 was about the same 
‘as the production of the United States in 1914 or 70,000,000 more than 
Mexico’s maximum. It was over three times as great as Russia’s peak 
yield of 85,000,000 barrels in 1901, or almost six times its yield of 45,000,000 
in 1924, 

Enormous Drop Towards Normal Rate. A loss of 30,000,000 barrels in 
a year would mean a tremendous shock to any country or any state; but in 
the case of California this decline from the 1923 production made but 11.8 
percent. The absolute decrease was not much less than the peak produc- 
tion of Pennsylvania (reached in 1891), that of Illinois (1908), or that of 
Louisiana (1920). During 1925 there may be another drop in the settled 
production, which from January to April was about 600,000 barrels daily 
or nearly 70 percent of the peak average of 872,000 barrels attained for 
the week ended August 18, 1923. Due to the development of Inglewood 
the daily yield was boosted to 670,000 barrels before the end of July, 1925. 

Exceptional Concentration in California. In no other important oil state 
except Arkansas and Wyoming is the principal production of crude oil so 


OILDOM: ITS TREASURES AND TRAGEDIES 151 


per SS. SCENES FROM THE “SUNSET” 
ws STATE—THE OLD AND 
oe THE NEW IN OIL 


Site of the first well in Cali- 
fornia, drilled 140 feet with spring 
pole, 1869. First producer com- 
pleted in 1875, also in Pico Canyon 
where the early Padres obtained 
tar from seepages. Production of 
oil in 1876 was only 12,000 barrels 
for the entire state, increasing 
100-fold by 1895 and _ 10,000-fold 
by 1921. 


—Courtesy of The Lamp. 


Ventura (Ave.) field, near the Pacific, 40 miles 
west of Pico Canyon. A late well in May, 1926, 
came in at 5,600 feet with 2,600 barrels of 30° oil. 

* By middle June daily output averaged 46,000 barrels 
of which Shell Union had 54 percent, Associated 40 
percent, and General Petroleum (Stand., N. Y.), 6 
percent. Daily rate, December, 1926, was 60,000 bbls. 


Oil among oranges at Santa Fe 
Springs, which in its 6th year was 
yielding 50,000 barrels daily or 45 
percent as much as Signal Hill (at 
Long Beach). 

What is left of Lakeview’s sand 
and cement dam built in 1910 when 
this famous well flowed 65,000 bar- 
‘rels daily. (In Midway-Sunset field.) 


152 OILDOM: ITS TREASURES AND TRAGEDIES 


closely confined to small areas.* Out of a total area of 117,000 acres or 
182 sq. miles in 1925, proven oil land in Kern County has 62 percent; 
Fresno County, 12.5 percent; Los Angeles County, 7.3 percent; and Orange 
County, 6.2 percent (see page 89). The two last named counties, with 
hardly 25 square miles of proven territory crowded into the southern part 
of the one and into the northwestern half of the other (page 385), con- 
trolled 78 percent or over 205,000,000 barrels of the California production 
in 1928. If to this be added the 46,000,000 that came out of Kern County, 
it will be found that 95.5 percent of the state’s yield in that year is 
credited to three counties. In other words, three American counties have 
lately been contributing 31 to 84 percent of the domestic production of 
petroleum and from 20 to 22 percent of the world output! 

Position of Petroleum in the Sunset State. California is a common- 
wealth of its own in practical independence of the rest of the country at least 
in respect to natural resources. No other state compares with it in varieties 
of climate, vegetation, animal life, natural scenery, and products whether 
of the sea, soil, or subsurface. It usually leads in at least 11 mineral 
products: Asphalt, borates, chromite, diatomaceous earth, gold, magnesite, 
oil (quantity only), platinum, potash, pyrite, and quicksilver. It is second 
in cement, lithium minerals, marl and peat; and third in crystalline 
graphite, manganese ore, natural gasoline and petroleum, considering the 
values of the minerals at the places of production. California is also an 
important producer of clay products, copper, salt, silver and stone although 
not ranking among the first five states in any of them. It is, however, 
fourth in the value of natural gas, and third in its volume (1923). The 
value of the state’s production of oil, gas and natural gasoline in 19238 
totaled $221,000,000, which must have made considerably more than half 
of the value of all its mineral products for that year. 

Petroleum Most Vital to California.j While the combined value of the 
three natural petroleum products may not make up quite so large a per- 
centage of the total value of minerals produced in each of such states as 
Arkansas, Kansas, Oklahoma, Texas, and Wyoming, petroleum does mean 
a great deal more to California’s industrial life than it does to that life 
in any other state. Although well endowed with water power this state 
is nearly as deficient. in coal deposits as New York and New England. 
Natural reservoirs are not numerous and it takes time to build dams. 
Meanwhile, without cheap fue! California could not have reached her high 
degree of development and now harbor 4,000,000 inhabitants. In the 
course of thirty years mines, mills, smelters, factories, public utilities and 
railways west of the Rockies as well as ships on the Pacific have become 
dependent upon California fuel oil for much or all of their energy sources 
(see map). Mainly for such purposes was the great bulk of California oil 
adapted until the recent discoveries of lighter oils rich in gasoline content. 
With the exception pictured on page 112, this state has been self-sus- 
taining in regard to motor fuel notwithstanding its almost perfect motor 
saturation. On January 1, 1925, California had registered nearly as many 


* California’s total to the end of 1924, 2,092 million barrels, surpassed Russia’s corre- 
sponding total by almost 50 million barrels. Kern County alone has produced 100 million 
barrels more than Pennsylvania and New York together. The Midway-Sunset field within 
this county has contributed as much oil as all the pools of the Gulf Coast region of Texas. 

+ Without oil this state would not rank fourth in value of mineral products but would 
fall below Kansas and Michigan, displacing Louisiana for thirteenth place. _ 


OILDOM: ITS TREASURES AND TRAGEDIES 153 


IV : 
526,000 BELS. 


as 


YNYI THN YF | 


i ASHLAND 


Y Pom : 


CHEVENNE 


Y 


Y h Z j 
BSS EV. i 
\ Br 200 oh! | 


NS 


Journ Pwciic Coss » 


DISTRIBUTION OF 


sl 
CALIFORNIA FUEL OIL 
IN THE WESTERN STATES 
Ano AVERAGE PION TMLY. UMPTION 
Pereo.eura Corrmyree 


13/7 SI Srars Bo@vem of Devens? 


THE GEOGRAPHIC SIGNIFICANCE OF CALIFORNIA FUEL OIL 


This map shows the territory supplied with California fuel oil a few years ago. Since 
then, as indicated on pages 97-99, fuel oil has violently invaded the markets of the world 
in competition with coal. One reason is found in the greater radius of navigation pro- 
vided a vessel without re-fuelling. Fuel oil stations are now widely scattered along 
international channels of trade. They get their supplies mainly from Mexico, California, 
and the Gulf coast of Texas. Said Robert Newton Lynch, vice president of the San 
Francisco Chamber of Commerce, in May, 1924, at Washington: ‘‘The vast output of 
oil in California means that our Pacific ships have practically all been converted to oil 
burners. This cheap fuel also supplies railroads of the West, having almost entirely 
eliminated coal. At present prices a barrel of oil is equal to a quarter of a ton of coal, 
and counting coal at $10 a ton, a dollar’s worth of oil will go as far as $2.23 worth 
of coal. Even at that, great bodies of coal are present in Utah and Wyoming, and there 
are high grade deposits in Alaska, besides minor deposits in Washington, Oregon and Cali- 
fornia.”” (In 1926 the Great Northern Ry. contracted for 314% million bbls. yearly of 
Sunburst, Mont., fuel oil.) 


OS 


154 OILDOM: ITS TREASURES AND TRAGEDIES 


motor vehicles as New York and boasted one car or truck for every three 
persons (page ..). This is more than twice the average degree of motor 
saturation, 6.4 persons per vehicle, for the whole United States. 

Economic Evolution and Emergence from Isolation. California’s oil in- 
dustry was born in 1876, simultaneously with the first but larger produc- 
tion in Ohio and West Virginia. From only 12,000 barrels in that year the 
yield increased to almost 700,000 in 1888. The annual rate then dropped 
nothwithstanding the introduction of fuel oil for locomotive firing. It took 
time to design and perfect oil-burners, to prove the economy and efficiency 
of fuel oil, and to overcome objections to its use in place of coal such as 
doubt as to the capacity and permanency of the supply. From 1,200,000 
barrels in 1895 the annual output advanced steadily to almost 100,000,000 
barrels in 1914. From 86,000,000 in 1915 production gained slowly to 
112,600,000 barrels in 1921. An output of 138,500,000 barrels in 1922 per- 
mitted California’s influence to be felt for the first time east of the 
Rockies (pages 21 and 78-79). The Mid Continent producers, much more 
than others, suffered from the competition with Pacific coast oil in 1923 
and 1924. An increase of 125,000,000 barrels in one year, unheard of 
before in the annals of oildom, could not happen without harmful effects 
whether from the standpoint of economic waste or corporate profits. 
Tanker transport through the Panama Canal permitted the dumping of 
distress crude and gasoline along the Atlantic at less cost than if pumped 
through pipe lines from the Mid Continent. Mitigating that evil, how- 
ever, is the growing demand of joy riders in California and the decrease in 
daily output to only twice the normal of almost 300,000 during the decade 
prror. toe 1922.5 

New Development in 1924 and Early 1925. Nothing of a sensational 
nature happened in California in the course of 1924. In daily output 
southern California fell off 166,000 barrels between January 5, 1924 and 
January 3, 1925, making a decrease from 70 percent of the state’s total to 
53 percent in the course of twelve months. The rate for the whole state 


* An excellent economic article, ‘‘California’s Part in Present Situation,’’ by Charles E. 
Bowles in The Oil and Gas Journal, September 11, 1924, voices the views of the Mid-Con- 
tinent interests which were so adversely affected by the flood of oil from southern Cali- 
fornia during the past two years. See also ‘“‘Sunkist Oil for Eastern Seaboard” in The 
Lamp, house organ of the Standard of N. J., December, 1922. 

Read “California’s Effect on the Export Trade,” by L. M. Fanning, June 5, 1924, and 
“California Again a Menace to Oil Market,” by N. O. Fanning, in The Oil and Gas Journal, 
March 19, 1925. Following are excerpts from an address delivered in December, 1924, at 
the Fort Worth meeting of the American Petroleum Institute by D. M. Folsom, of the 
General Petroleum Corporation: 

“The Pacific Coast, from the standpoint of fuel, has always appeared as an isolated 
province with California oil the principal source of heat, light and power, over a wide 
territory. * * ** Three years ago we expected the output to climb to 400,000 barrels a 
day (it actually approximated 1,000,000 barrels potential at one time in August, 1923). 
*x #* * In the three years from January 1, 1922, to January 1, 1925, California produced a 
total of 634,000,000 barrels (an annual average of over 211,000,000). The markets on the 
shores of the Pacific have been expanded by both normal growth of business and deliveries 
into new territory. The use of oil in the area normally and properly supplied by California 
has grown from 300,000 to 500,000 barrels a day. California companies also sold and shipped 
in the last two years to Atlantic and trans-Atlantic markets not previously supplied by 
them an average of 150,000 barrels daily or a total of over 100,000,000. In other words, 
our sales for the past three years totaled 562,000,000 barrels, 20 percent of which was sur- 
plus sold in direct competition with the output from Mid Continent, Gulf Coast and Eastern 
fields. During this time the ‘‘Sunset State’? emerged from a position of isolation and 
became an integral part of a world-wide industry.” 


155 


CALIFORNIA POOLS, 1926 
Average Daily Rate During First Week of 


December 

Number Thous. 

of wells bbls. 
MONS MBean esac ance cette TAT 97 
IMIGWAY-SUNSEL cic cee stele cc cian 2,998 93 
Huntington Beach 3.2... 2.2.. 412 85 
Ventura Avenueii os slccckcs 7 60 
PAlita tes SPLINGS ae aae ea 338 45 
Inglewood (below) ......... 204 40 
HPCE LLG F oiemes uavegerace stotareee oanohece — 
PROPYAN CE, Seis saks, Hens Corea 659 26 
DOMINGUE fete 5 a CN ee hee 76 21 
Coalhmgas Fullerton... sece: — — 
Montebello, Coyote .......... —— — 
Rosecrans (at Jeft)’......... 140 14.5 
Kern River, Santa Maria.... —— — 
Seal Beach (Los A. County). 5 10 


(AT LEFT) ROSECRANS POOL OF VERY 
LIGHT OIL.—Note the California type of 
steel derrick with safety scaffold, male by the 
International Derrick and Equipment Co. 


dropped 138 percent—from 700,000 to 607,000. The ebbing was arrested 
somewhat by the reopening of old or shut-in wells in the San Joaquin 
valley, the drilling of new wells in the Elk Hills field, the deepening of 
other wells, the opening up of the Rosecrans pool southwest of Los Angeles, 
and the continued development of the nearby Compton or Dominguez 
(page 20). The last named produced 6.8 million barrels, or more in its 
first full calendar year (1924) than any of such older fields as Kern River, 
Montebello, Sunset, Coyote, Richfield and Fullerton in the same year. 
Rosecrans is remarkable not for quantity but for quality. The first well 
came in late in October, 1924, with 410 barrels of 36.5 gravity oil from 
a total depth of 4,698 feet. Later wells ranged in depth from 4,520 to 
4,781 feet, with oil as light as 42.8 degrees Baumé and yielding 40 to 50 
percent gasoline. Its latest well was finished in March, 1925, as a pumper 


THE NEW POOL AT 
INGLEWOOD 

Discovered late in 
1924, this’ relatively 
shallow pool attained a 
peak above 110,000 bar- 
rels and an average: of 
52,000 daily during 
1925. In July, 1925, it 
was temporarily second 
to Smackover (Ark.), 
and ahead of Signal 
Hill (Long Beach). At 
the middle of 1926 it 
ranked third in Cali- 
fornia with a daily rate 
of 50,000 bbls.; in Dec., 
6th, with 40,000. The 
oil is heavier than the 
average produced in the 
Los Angeles Basin. 


—The Lamp 


156 OILDOM: ITS TREASURES AND TRAGEDIES 


good for 80 barrels from a depth of 6,737 feet. It was then the deepest oil 
well in the world. New additions are the shallow Culver City area of 
the Baldwin Hills-Inglewood district which was producing at the daily 
rate of about 2,500 barrels from 10 wells on March 21, 1925,f and the deep 
Buena Vista valley pool between Elk Hills and Midway-Sunset where a 
1,600-barrel well was brought in about the same time.t At the middle of 
1925 the Inglewood pool had a daily rate approaching 90,000 barrels, making 
it fourth in the United States. This rank Inglewood held even before its 
rejuvenation in the spring of 1926. . 

Whence the Current Production Comes. In 1920 only 36 percent of the 
production came from pools of light oil located mainly in the Los Angeles 
Basin; in 1921, 44 percent; in 1922, 63 percent; and in 1928, 80 percent. 
In 1924 it is estimated that no more than 68 percent of the 232,000,000 
barrels was obtained from light-oil pools. In the table below the daily 
average (in thousands of barrels) is indicated for a late week in 1925. 


Tone ybeache ni. se eee 113 "POPYANCE 5,5 cstoe er sek 82 Coyote, isis)... seeateeee 18 


Midway-Sunset ....... 100 WOU Baill s)cda ieee nae Pate Pullerton 3.252.202 15.3 
Incléwood.s. Scene 69 Domineuez . > .eeesias 26 Kern Riverso.sneeeee 12.4 
Santa: Fe Spgs......... 53 Rosecrans, ose 25.5 Richfield ‘.3..;.ee er 11.5 
Huntineton Bese ask 44 Coalingay-s dics vee 19.6 | 


Ventura-N’hall ....... 37 Montebello... c senrin oer 19% 


Los Angeles Basin the Leading Source in 1925. Herewith is tabulated 
important facts about the seven foremost fields of southern California, in- 
cluding the total production to January 1, 1926, and the production in 1924 
and 1925, expressed in millions of barrels. Noteworthy are the high yields 
per acre and per well. 


Year Production ToJan. No.of Acreage Yield 

Field or pool found 1924 1925 1, ’26 wells proven. per acre 
ONG beach igs helene 1921 60.1 40.1 187.7 620 1,250 142,150 
Santa Herspriness ene ace cele ail 26.4 19.1 136.5 350 1,570 86,973 
Huntineton: > Beach.n tes ..as 1920 dice 15.9 81.5 335 2,290 35,600 
TOrrvances an Aa ee ce ee 1922 17.5 HEL 34.1 603 3,550 9,600 
Domineuezans secs sese eee 1923 6.8 13.4 20.4 62 870 25.000 
Inglewood e.cchesie es oe ee 1924 01 19.0 19.0 fale 850 22,400 
FROSCERANS cole a iste ceca tes 1924 6 7.4 8.0 113 400 20.000 
Totals. eisai se eo ake T2819 0 128-9 487.2 2,254 10,780 45,200 


Inclusive of the other “pools” (page 35), the Los Angeles Basin con- 
tributed about two-thirds of California’s total output of over 230,000,000 
barrels in 1925. Despite a sudden drop of 10,000 barrels in daily yield, the 
six fields listed above were in April, 1925, supplying about 55 percent of 
the state’s total, which in four years has stayed above the 600,000 mark.* 

Resume of California’s Remarkable Record. Beginning a half century 
ago, 16 years after the Drake discovery, or 27 years after the Marshall 
gold discovery, California has produced more petroleum than Russia and 
in one-fifth less time. It now leads all foreign lands, not one of which in 
a single year has come within 70,000,000 barrels of winning as much as | 
this state did in 1923. On one day of that year 10,000 California wells 
were able to produce 1,000,000 barrels. All in all, the oil fields of the 


+ Discovered by the Standard Oil Company (California) at 2,186 feet, September, 1924; 
initial yield 160 barrels; located about 9 miles west of Los Angeles. In the fall of 1925 the 
Amestoy was superseded by the Athens No. 6 of the Miley Oil Co., also in the Rosecrans 
field, but 854 feet deeper, as the deepest producer. 

~ By the Pacific Oil Company, in section 19, 31-24, at 4,000 feet. 

* Read “California’s Wonder Pools, ” Barron’s, Feb. 22, 1926, and ‘‘Less California Oil,” 
Wall St. Jnl., April 18, 1926. 


OILDOM: ITS TREASURES AND TRAGEDIES 157 


“Sunkist State’ are even more marvelous than those of Mexico. Its 
asphalt beds have preserved the bones of more than 10,000 extinct animals 
on less than 20 acres of one field alone (see page 29). Among its other 
wonders of the oil world are the tremendous thicknesses of the oil bear- 
ing horizons, up to 2,000 feet in a single field, thus insuring long life of 
productivity. Consistent with California’s surprising variety in physical 
features and natural resources, a great range is found in the depth and 
quality of the petroleum deposits (page 35). Oil now comes from a well 
in the Rosecrans pool 6,737 feet deep, the deepest producer in the world. 
The state produces more per acre and more per well than any other state 
(pages 39 and 48). Best of all, it is believed to have the biggest reserves 
of any state, more than two-fifths as much as the unmined oil of all the 
five Mid Continent states, including that of the Gulf Coast region (page 
39). Tourists of the twenty-first century may yet motor amidst the 
scenic splendors of California provided the wastefulness ‘of present joy 
riders be reduced, for a limit there is on the potential supply of petroleum, 
the elusive liquid! (See index under “California,” “Kern County,” and 
especially “Los Angeles.’’) 


2. OKLAHOMA, HOME OF CUSHING AND HEART OF MID- 
CONTINENT 


Oklahoma Outranks California in Value, Not Volume.* Owing to its 
much greater content of gasoline and lubricating fractions, Oklahoma oils 
bring so much better prices than most of the California oils as to place 
the former in first rank in respect to value. In 1920, when Mid Continent 
erude sold at $3.50—the nearest it has ever come to its true value—the 
output of Oklahoma’s 538,000 wells was worth $356,400,000—the greatest 
value for any state for any year, and 26 percent of the total for the United 
States in that year. The average annual value for the nine leading states 
during the seven years 1917-1923 is given below for purpose of comparison. 


Million Per- Million Per- 

State dollars cent State dollars cent 

MR IGWOTE Me le sic, wis Gao ss.2 5.5 $238.1 28 Wie Ge Var gi Tie inca 5s xi sles ee $30.5 3.6 

| By ate eo ae eel cae 161.8 18.9 Pennsylvaniamrncccciccs + aes 29.6 8.5 

MO SEIUECMIN CIEE fil tetet ecole, ac io os woe. © 159.4 18.7 WYOMING ake face holetate eee oe 29.3 3.4 

WOEITISAS ERA ere ie steeieso c-c:p sssch'e 76.4 8.9 WMinOlSsapamcenaeevontawaiers aches « 26.8 3.1 
LGGUISIA Tia cle ee ne. ohele.o aes 45.4 5.3 


Important Producer of Other Minerals. Oklahoma is not as large, varied 
or populous as California yet yields a variety of products from both soil 
and subsoil. The state stands first not only in value of petroleum but also 
in quantity and. value of natural gasoline and of zine. It ranks third in 
natural gas and in diatomaceous earth (including tripoli). It is surpassed 
by Pennsylvania alone in the annual value of all mineral products. In 


* A rhymster once wrote, “Of cattle and cotton great Texas is full, of oil Oklahoma, 
Wyoming of wool.’ This seems literally true according to a recent map of the state’s 
oil and gas regions. Production is now obtained from five times as many counties as in 
California and these are more widely scattered, one of them, Beckham county, being 
situated next to the Texas Panhandle. The big bulk of the oil, especially the high grade 
or light oil, is derived from a domain centering around southern Osage County and not 
far northwest of Tulsa. As the California output diminishes, the national center of 
petroleum production will likely return from Texas into southwestern Oklahoma. 

Outside of Oklahoma few persons realize that this state has stood first in both volume 
and value of petroleum since the World War began with only four exceptions. Cali- 
fornia was foremost in quantity during these ten years only in 1919, 1923, 1924, and 1925, and 
will probably retain such rank for some time since its rate of yield is fairly settled and no 
startling developments are looked for in Oklahoma. 


158 OILDOM: ITS TREASURES AND TRAGEDIES 


recent years it has risen to fourth place in lead, which with the zinc; is 
mined from limestone beds in the northeastern corner of the state. Okla- 
homa is either fifth or sixth in gypsum, a product of the Red Beds in the 
central-southern part of the state. From the thirteenth in coal during 
1918, the state had dropped to twentieth rank in 1923. Labor troubles and ~ 
use of liquid fuel account for the decline in coal mining. While the south- 
eastern quarter of the state contains most of the coal a the north- 
eastern has most of the oil wells. , 
Comparative Production of Natural Gasoline. In 1923, as in 1922, Okla- 
homa was far ahead of any other state in the quantity and value of gaso- 
line recovered from natural gas. Out of a little more than 1,000,000,000 M 
cubic feet of all natural gas produced in the United States in 1923, about 
87 percent was treated for the content of gasoline vapor; but in this state 
about 97 percent of the output was so treated. For the whole country the 
percentage has increased from 2 in 1918 to 62 in 1918 and 72 in 1922. 
Oklahoma’s leadership in this practical form of conservation is plainly 
shown in the table below. The values given are at the plants near the 
oil or gas wells (pages 108-109). Both quantity and value of the raw or 
unblended motor fuel are expressed respectively in millions of gallons and 
millions of dollars, for 1928. 


State Quantity Value Percent State Quantity Value Percent 
Oklahoman. saceoee se 270.2 $23.0 29.8 Wiyoming tie oie Ass $2.0 2.6 
(DEXA SP aye Savio helenae Li 14.8 19.1 Pennsyivania® }i isis. sia Od 260 3.3 
Californias six.\.eca< 173828 16.6 20.3 Arkansas ii tice a 16.2 1.9 2.5 
West Virginia...... 63.4 8.9 11.5 OHIO ee Le ae 10.0 1.45 1.9 
Bouisiana ks ates 40.7 8.5 4.5 Kentucky # orien ie tet 7.6 1.07 1.3 


Kansas produced a little more than Kentucky, namely 8.8 million gal- 
lons, but it was worth not quite $700,000. Illinois was the 11th state in 
value of natural gasoline recovered—about $850,000—but ranked only 12th 
in quantity. New York produced less than one-twentieth as much as 


Kansas. Data derived from U. S. Geological Survey press bulletin dated 
November 21, 1924. 


SUMMARY NATURAL GASOLINE PLANTS, 1925 ., 
(Daily capacity in thousands of vewneley eel 


Total Total Plants 
plants capacity Total Total operating 

Aug. 1, Aug. 1, plants capacity Aug. 1, 
States 1925 1925 1924 1924 1925 

Arkansas} vale Sie oe ease eee 12. 82.5 8 50.5 9 
Kearisas ester te OU ie nee Coenen ag 23 1A 15 64.9 18 
FTFOUISIAN AW s Ay eolglIEe eo EIA Late eter ote 56 LAr Gr (sr 35 130.4 A4 
Oklahoma Ma tea Srey iho aa ae 352 1,525.8 340 1,356.6 315 
BTM ORAS re PR EN Aa ieee ened ae RN Tg ils94¢ 1,026.7 149 876.2 146 
Mid-Continent) (cies miners aks een 600 2,933.9 547 2,478.6 532 
California yeaa beac crenata ea ees 162 1,227.8 108 600.7 142 
STM TINTS 3 ess Sis Oe eee asl eee ene 125 40.0 10 Da 22 
Indiana es ke eee ne CU ea acct 1 3 Bae I Ma tee hy GS 1 
Kentirek yas ses die niece nn otek Conseco eaele AEA 19.7 10 8.6 10 
IN@Wit¥ OM Girne eeess ee ae Raley Wares eh rg iu 5 Lewets Dh dene cie 1 
OHIO Fee Ce ates ees eae ee oleae init eel hace 29 13:3 52 14.9 29 
POnNSVIVANIA oss li oteve lade eile eiceacsretemene 96 AAT Be a beat 68.2 94 

South Carolina wig ticle stan coders seeerene at 2.0 a ation | Meet On nea eeR ee ne 
Weesta: Virginian ces ewicy eae wage aehetene 108 124.6 148 130.3 105 
WYOMIN eee haiirs revels obi cdavorcnemeheltceislrcebers 10 84.5 16 93.6 q 
SUD tOtaliive-cuiccn ere ensie Uisuurode aiees ts sepa 544 1,560.4 465 918.4 511 
Grand otal caeetusease ssc eesices ate 1,144 4,494.3 1,012 3,397.0 1,043 


* No plants out of Mid-Continent. The Oil and Gas Journal, Aug. 13, 1925. 


Glenn Pool the First Great Discovery. The incentive for early explora- 
tion in the old Indian Territory came from Kansas. Oil was there dis- 


OILDOM: ITS TREASURES AND TRAGEDIES 159 


HAKicock 


BROOME 


OuI9 
as PHNNSYLVANIA 
& 


Sy 
nr 
La Zehrsour, 
Z 


meee, 
ENDLETON 


@ REGIONS OF OLD OIL. ANDGAS POOLS 
# NEW OR REVIVED Ol POOLS 
%* NEW OR REVIVED GAS POOLS 
© DRILLING WELLS OF UNUSUAL DEPTH 


A FAMOUS FUEL STATE IS WEST VIRGINIA 


It has usually stood second in value among the mining states. Recently it rose to second 
rank in coal production. It was second in petroleum in 1900 and 1901, but lately droppea 
to twelfth with the discouragement due to the low price of crude. Wyoming and Kentucky 
are probably the only other states in which fuels contribute 90 percent or more to the total 
value of the mineral yield.. West Virginia is particularly noted for the lubricating content 
of its crude oil and the smokeless quality of the coal from the Pocahontas and other fields. 


NATURAL GAS IN THE UNITED 
STATES AND WEST VIRGINIA 


In 1924 over 1,141 billion cubic 
feet of natural gas was consumed, 
double as much as in 1914. It was 
worth $105,800,000 at the wells and 
$253,800,000 at consuming points. 
Leading producers were: Okla. 
(314.5 bil. ft.), Calif (189.7), W. Va. 
(182.8), La., Tex., Pa., Ohio, Wyom., 
Ark., and Kan. In 1923 West Vir- 
ginia still led in value although tied 
with Oklahoma in quantity (204 
bil.). The former had held first 
rank since 1909. In 1924 Pennsyl- 
vania also fell off, from fourth to 
sixth. Natural gas for households 
_was cheapest in West Virginia in 
1924, only 29.6 cents per thousand, 
compared with 91.2 cents in Mis- 
souri. The percentage of the total 
volume treated for extraction of 
gasoline was 89 in 1924, 87 in 1998, 
7125) >in. 1922, and 62:2, in. 1920, ac- 
cording to the Bureau of Maines. 
(The well shown at the right had a 
closed pressure of 925 pounds per 
square inch in 1925. It belongs to 
the Barbour County Natural Gas 
Co., operating in West Virginia.) 


160 OILDOM: ITS TREASURES AND TRAGEDIES 


covered by the drill in the early eighties although actual production did not 
begin before 1889 or two years ahead of production in what is now Okla- 
homa. For 10 years the Oklahoma output was trivial, not reaching 10,000 
barrels annually until 1901.* In 1905 the Bartlesville-Dewey pool was 
opened. On November 22 of the same year the first well of the great 
Glenn pool came in for only 85 barrels at 1,481 feet. This pool’s daily yield 
increased during 1907 from 12,500 barrels in January to 82,000 in October. 
It caused the Gulf and Texas companies to build pipe lines to the Gulf 
Coast from eastern Creek County in: Oklahoma. On March 12, at 1,450 
feet, Cushing came into existence and eventually graduated into the world’s 
greatest light gravity oil field (page 42). This district also in Creek 
County, has several divisions, including the Drumright and Shamrock, and 
covers an area of about 203,000 acres or over 335 square miles. In total 
output to the end of 1924, Cushing is surpassed (in the United States) by 
only one other field, the Midway-Sunset in California, thus ranking ahead 
of Coalinga (Calif.), Bradford (Pa.), and Kern River (Calif.), each of 
which has contributed 250,000,000 barrels or more. The first important find 
in southern Oklahoma occurred in August, 1918, when relatively heavy oil 
(25 to 35 degrees B.) was found at Healdton. Nearby in the same County 
of Carter, the Hewitt pool of a little lighter oil was discovered, hardly six 
years later. 

Burbank and Tonkawa Boost Output to the Half-Million Mark. The 
initial output of oil from the Osage Indian reservation dates from 1901, 
the year after the first real commercial discovery in the state was made 
when the Red Fork-Tulsa district was opened just off the southeast corner 
of this great reservation.t| Eastern Osage was first developed, and the 
output rose from 10,500 in 1902 to 1,870,000 barrels in 1905. It was steady 
at about 5,000,000 barrels during the next five years, reaching a peak of 
about 11,100,000 in 1914 but dropping off 33 percent the next year. The 
10,000,000 mark was again passed in 1918; but the big impetus to pro- 
duction did not come before the Burbank was found in the extreme western 
Osage. This discovery in May, 1920, at 2,965 feet, made by Marland, 
brought the yearly yield of Osage up to 17,000,000 barrels. Daily pro- 
duction climbed from 55,000 at the end of 1921 to the peak of 120,000 
barrels in Burbank about the time the peak for the state was attained, or 
just before the peak of 2,320,000 barrels for the whole country was reached - 
on July 14, 1923. (A record broken week ended May 29, 1925: 2,348,000 
barrels. In week ended November 27, 1926: 2,380,000 bbls. average daily). 

Similarly, Tonkawa (pages 32-338 and 70) has twice boosted the totals 
for the state and the entire country. This younger field is located about 
30 miles southwest of Burbank and equally convenient to Ponca City. The 
Cosden and Marland companies jointly drilled the original discovery well 
in June, 1921, to 2,658 feet two miles south of the Kay-Noble county line. 
First peak was reached about June 1, 1923, at 112,000 barrels daily, bring- 
ing Oklahoma’s output up to an average of 505,000 in May and 519,000 in 
June, 1923, which records were exceeded in August, 1924, when the state’s 


*In fact, before 1907 the yield was so insignificant that for statistical purposes the 
U. S. Geological Survey included it with the quantity credited to Kansas. 

~ Osage County or “Nation” is the largest subdivision of Oklahoma and in the course of 
25 years has become literally dotted all over with derricks, making this the leader in the 
state. During the past five years it has produced 155,000,000 barrels or 15,000,000 more 
than Creek County; but in total to date the latter still leads with a credit of 530,000,000 
barrels compared with 285,000,000 for Osage to the end of 1924. 


OILDOM: ITS TREASURES AND TRAGEDIES 161 


WEST TULSA— 
OKLAHOMA’S 

FOREMOST RE- 

FINING CENTER 


Here, across’ the 
Cimarron from Tulsa 
proper, are located 
not only the great 
Cosden (now ‘Mid- 
Continent’’) plant but 
also a smaller re- 
finery of The Texas 
Company. 


—The Texaco Star. 


average was almost 533,000 barrels daily. Second pool peak of about 108,000 
barrels at the middle of September, resulted from the opening of the 
Wilcox sand, 4,065-4,087 feet deep, April, 1924, by that successful wildcatter, 
T. B. Slick.* The initial well was good for 3,000 barrels of high gravity 
oil. Rotaries were used for rapid development. The average daily for 
the state rose to 543,000 barrels in September, the highest level in its his- 
tory, and staid above the half-million mark almost to the end of the year. 
Without this wonderful discovery at Tonkawa, rejuvenation through deep 
drilling, Oklahoma could not have eclipsed its achievement of 1923 through 
increasing the output over 10,000,000 barrels during 1924, while California 
was losing 30,000,000. | 

Prominent Pools. In the following table the twelve leading pools -in 
Oklahoma are arranged in their order of importance for 1925. The Crom- 
well pool in northeastern Seminole County proved to be the most sen- 
sational in its development next to the Tonkawa deep. It was discovered 
by the Cosden Company in December, 1922, but lay dormant until March, 
1924. Daily production jumped from 543 barrels in February to 61,000 in 
August after the new well came in at about 3,400 feet with 4,600 barrels of 
high gravity oil. The Seminole pool led in December, 1926, with 110,000 
barrels. 


Rank, Production (mil.) Rank, Production (mil.) 
1925 Name of pool To 1925 In 1924 1925 Name of pool To 1925 In 1924 
1 eam wists Gates Movies, ‘s 53.2 22.4 7 PR QWitt a Seo Se Pate tence: 48.4 6.9 
2 Burpan keer ss ce es 95.0 30.8 8 Healdton ans utcrecae: 131.7 6.0 
3 BriStOWrter ote oe canes sare Lai; 9 IWieWOKaie tt caer, 2 enter eer 11.5 
4 Cromiwell®cr 22%: 5... 4 10.4 10.3 10 Grahams situ asice. sees 10.4 
3 Papoose (Wetumka).. 3.6 3.5 11 Watchorn (Otoe)..... 1.2 1 
6 GUS HEN Sareea erceeitey ote eos 289.0 8.7 12 Glenn tigiot. ahem Mvaulcieks 174.0 3.6 


Summary of Oklahoma’s Situation in Oil. The very widespread oil in- 
dustry of this state is unique in many ways. Relatively more people 


-* He is likely the largest individual operator in the Mid-Continent, having under lease 
more than 350,000 acres. See Chapter XII. First peak of Tonkawa Deep, 88,600 barrels, 
occurred in September, and the second of 89,400 came in December, 1924. 

+ Dixie Oil Co., according to Wall Street Jovrnal, March 4, 1925. 


162 OILDOM: ITS TREASURES AND TRAGEDIES 


therein are interested in the industry than in.California.t In part this is 
proven by the higher per capita production of crude petroleum, 58 barrels 
in the latter and 78 barrels in Oklahoma during 1924: Only one other state, 
Wyoming, with just one-tenth the population of Oklahoma, excels in this 
respect, the per capita output there being 182 barrels last year. Only 
one other state, Pennsylvania, possesses more than 60,000 live wells. Dur- 
ing the year 1920 alone 9,097 wells were drilled in this state, probably the 
greatest number of new wells for any state in a twelve-month period. 
During 1924 there were 4,814 wells drilled, about 200 more than in all 
Texas and 600 more than in all the territory east of the Mississippi. Okla- 
homa was the first to pass the 100,000,000 mark (in 1916) and also the 
140,000,000 mark (in 1922). Although to date it: has produced only three- 
fourths as much oil as California it has been the source of about 500,000,000 
barrels more of light oil than any other state; and this has been sold at 
a sacrifice for the good of the whole country. Oklahoma contains two of 
the world’s three greatest high gravity fields. It is the home of the 
opulent Osages who own one of these fields and who number about 2,250. 
This world’s wealthiest tribe received for 1924 an income from oil prob- 
ably exceeding $20,000 for every papoose, squaw and buck! And they are 
not the only Red Skins in Oklahoma to enrich whom the white man has 
run all the risks!£ 


TEXAS—A TREASURE VAULT OF PETROLEUM 


Oil Story of the State With the Richest Reserves. It is not commonly 
known that Nacogdoches County in eastern Texas was the scene of the 
first petroleum development within the “Lone Star” state. Wells 150 to 
200 feet deep were drilled there in the early ’80s, and one flowed as high 
as 200 barrels a day but the field did not last very long. Texas became a 
more permanent source of petroleum in 1895 when the shallow Corsicana 
pool was opened in Navarro County. But the million mark in yearly yield 
was not reached until Spindie Top began to spout in Jefferson County 
(pages 40-41). In Hardin County, to the northwest of Beaumont, the 
opening of the Sour Lake and Saratoga pools later on in 1901-1902 marked 
the next steps in the growth of the Gulf Coast oil industry. In total 
output to 1925, Sour Lake ranks just below Humble, in Harris County, 
where a shallow sand above the salt dome was tapped in 1905, successful 
deep wells not being drilled before 1915. Goose Creek, also in Harris 
County, was developed between 1907 and 1912, deep sands being discovered 
in 1916. Fourth among Gulf pools in production to 1925, this one led 
Humble during 1918, and would have superseded Spindle Top in third 
place by now but for the progress made at West Columbia in Brazoria. 
County. The startling development of the last named was deferred from 
1918 until 1920 when the famous Abrams No. 1 of The Texas Company 
blew in, rating second in Texas oildom only to the great Lucas gusher at 
Spindle Top. Not all of the 40 or more salt domes have proven of com- 
mercial importance; but geologists generally concede that the largest re- 


+ According to the Census Bureau, in 1919 there were 21,180 wage earners employed in 
the oil and gas industry of Oklahoma, or 22.7 percent of the 93.205 in all the states. This 
was 63 percent more than in Texas, 71.5 percent more than in California, and 72 percent 
more than in West Virginia. 

< For details see Chapter XII. For additional facts, about Oklahoma refer to index. 
Its pipe-line mileage of 17,384 in 1924 was 5,340 greater than that of Texas or 6,020 miles 
greater than that of Pennsylvania. 


p26 'B} Avensgay 


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TEXAS—A STATE OF TREMENDOUS POTENTIALITIES 


1925, not 
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During the past three years half of the 62 
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164 OILDOM: ITS TREASURES AND TRAGEDIES 


serves in Texas, probably more than 2,000 million barrels, are contained in 
the Gulf Coast fields. Outside of Louisiana they are credited with over 
440,000,000 barrels produced up to 1925.* 

North and Central Sections Now More Important. Honor for being the 
oldest pool in North Texas goes to Petrolia where, in Clay County, a well 
less than 800 feet deep was drilled in 1905. Later on large gas wells were 
brought in and now the Petrolia field is probably the world’s greatest 
helium producer. Electra, in Wichita and Wilbarger counties, entered the 
limelight in 1911, and by 1925 had produced close to 70,000,000 barrels, 
one-tenth thereof in 1924. Burkburnett, one of the most spectacular fields 
found in Texas came into existence in 1912 but did not attain national 
prominence before the Townsite pool (page 72) was brought in six years 
later, followed quickly by the Northwest Extension and the Texhoma or 
Southeast Burkburnett. The entire field had produced 109,000,000 up to 
1925; and Wichita County fully 182,000,000 barrels inclusive of the yield 
from the Electra, Iowa Park, and Kemp-Munger-Allen pools. Burkburnett 
is 15,000,000 ahead of Humble, and Wichita County (including a little oil 
from Wilbarger County) is 35,000,000 barrels above Harris County of the 
Gulf Coast. To Wichita County (or the Electra district) credit is due for 
starting Texas uphill after toboggoning from its first yearly peak of 
28,186,000 barrels in 1905 to the bottom of 8,900,000 barrels in 1910; con- 
currently dropping from interstate rank next to California in 1905 to 
sixth, following Ohio in 1910. A greater sensation than the much more 
voluminous Lucas gusher of the Gulf Coast came in 1917, when the Ranger 
or North Central district became commercially and nationally celebrated 
after the almost simultaneous discoveries in northern Eastland and central | 
Stephens counties.{ A little. oil had already been coming from southeastern 
Shackelford and southwestern Palo Pinto counties (Moran field from 1914 
and Strawn from 1915). As a result of the widespread wildcatting in the 
greater Ranger district, Texas took third place in 1919 with an output of 
almost 80,000,000 barrels, more than double the 38% million produced in 
1918 (when Kansas stood third for the second time.) Production went to 
nearly 97,000,000 in 1920 or almost three times that of Kansas. 

Prolific Production from the Mexia Fault Belt. The East Central or 
Mexia district was unknown for oil outside of the shallow Powell and 
Corsicana pools in Navarro county until Colonel Humphreys drilled into the ' 
Mexia-Groesback structure late: in 1920. Development dragged along to 
September, 1921, when one of the biggest wells ever drilled in Texas came 
in for 18,000 barrels daily just west of the town of Mexia. Daily peak 
went up to 190,000 barrels eariy in 1922, and by March 1, or in less than 
six months, the Mexia pool had given up over 15.5 million barrels. Hum- 
phreys-Fohs activities were next devoted to the prodigious Powell field 


* Writing in the Wall Street Journal.of March 24, 1925, from San Antonio the great 
financial authority, C. W. Barron, called attention to the tremendous output per acre in 
some of the Gulf Coast fields. He regards Texas as a region of untold potentiality in oil. 
See pages 36 and 70. ae 

+ The four leading oil states in 1910 were California, Oklahoma, Illinois and West Vir- 
ginia. But for either the Caddo or Vinton fields in Louisiana, Texas would have become 
fourth instead of fifth in 1911. It stood fourth in 1913 and 1914, and the next year pushed 
Illinois out of third place as the result of deep drilling in the Humble pool. Kansas cap- 
tured third position in 1917 and 1918 despite steady gains in Texas. 

& The Texas & Pacific Coal (and Oil) Co., through the foresight of its engineer, W. K. 
Gordon, had leased 875,000 acres of what proved to be the cream of the Ranger field 
proper before bringing in the McCleskey well one mile southwest of Ranger in August, 1917. 


OILDOM: ITS TREASURES AND TRAGEDIES 165 


THE POWELL POOL ALONG THE MEXIA FAULT IN NAVARRO COUNTY, TEXAS 


At one time, in the fall of 1923, this was the world’s foremost producing pool. On 
one day the 24-hour rate exceeded 350,000 barrels. Its peak record was equalled by the 
Santa Fe Springs pool in southern California (August, 1923), and surpassed by the Toteco- 
Cerro Azul in Mexicec (December, 1921), and the Smackover in southern Arkansas (May, 
1925). (See chart on page 145.) 


found on January 7, 1923. Like the others along the Mexia fault, it is 
long but narrow, and covers but 2,500 acres, the same as the average of 
the three great fields of the Los Angeles basin (pages 34-35 and 70-74). 
Daily yield culminated on November 13, 1928, when nearly 355,000 barrels 
of 36 gracity oil flowed to the surface, making records for Texas and the 
United States (up to 1925) but not for the world (see Mexico).* Texas 
attained an average daily production of 580,000 barrels for the month of 
November, 1923, the highest in her history. Up to 1925 Mexia, including 
_ Currie, had produced almost 73,000,000 barrels in four years and Powell, in 
two years, 64,000,000. The irrepressible. partners, entrepreneur and 
engineer (Messrs. Humphreys and Fohs), next proceeded to startle the 
world with the Wortham field, spotted in late November, 1924, and spout- 
ing to 167,000 barrels on January 15, 1925, at the rate of 6,000 barrels per 
well. Wortham holds the world record for rapid development.} The only 
Mid Continent fields ahead of it in daily production during May, 1925, 
were Smackover, Tonkawa and Burbank. The important pools in the Wood- 
bine sand and in the Edwards lime along the fault zone are compared: 


Area Daily Total 
of pool, Length, Year yield to 

Pools of the Mexia, general Texas area, counties acres miles(a) found April,1925 1925(b) 
Mexia, East Central, Limestone.............. 3,300 7 1920-21 20,000 67.5 
Gurrien mast aOentral,.. Navarro ts... secede 600 y! 1921 2,400 5.0 
Powell, East Central, Navarro................ 2,500 1% 1923 54,000 64.0 
Richland, East Central, Navarro............. 300 14 1924 7,000 3.4 
Wortham, East Central. Freestone........... 900 4 1924 73,000 3 
Luling, Southwest, Caldwell and Gaudalupe.. 3,000 7% 1922 30,000 pla IB 
SICH eS Paitis 1 MaePaste chetelcns wale S ieee tebe bocca aie oes 10,600 30 186,400 150.9 


(a) Along the fault. (b) In million barrels. 


¢ The actual discovery was made by the Corsicana Deep Well Drilling Co., whose four- 
year old test on the Burke farm struck the Woodbine sand at 2,950 feet. It was offset by 
Humphrey’s No. 1 Green-Springfield, considered the best to early April, 1923. Powell pro- 
duction, Jan.-May, was only 30,000 barrels; in June, 445,000; July, 2,185,000 barrels. 

* When visited by the author, on April 3, 1924, Powell was producing an average of 200 
barrels daily from each of 650 wells, all a little less than 3,000 feet deep. 

y+ It took years to develop to their height some of the biggest fields in the history of 
oildom. It required from 1875 to 1882 to bring Bradford to its peak; drilling and pro- 
ducing kept on around Cushing three years before its culmination in April, 1915, but 
Wortham went over the top in just 51 days after Thanksgiving of 1924. See reference to 
Humphreys-Boyd Oil Co. in chapter “Human Factors and Beneficiaries.’’” Within three 
months after the first well came in, Wortham became world renowned as evidenced by an 
article, “The Latest Oil Wonder,” which appeared in the Manchester Guardian Commercial 
and was reprinted in The Baltic-Scandinavian Trade Review of February 11, 1925 


166 OILDOM: ITS TREASURES AND TRAGEDIES 


Producing Districts During 1924 and 1925. .Texas has now seven pro- 
ducing districts: Electra, Ranger, Mexia, Gulf Coast, Mirando, Amarillo 
and Marathon. The first three are named after the earliest important pool 
found in each; but for statistical purposes they are differently designated 
in the trade journals, namely North Texas, North Central, and East Cen- 
tral. Southwest Texas takes in (illogically) such widely separated fields 
as Luling (about 45-50 miles northeast of San Antonio), Somerset (16-20 
miles southwest therefrom), and Mirando proper (about 30 miles east and 
southeast of Laredo). Quite properly, the Amarillo district may be con- 
sidered as Northwest Texas and similarly Marathan as West Central or 
West Texas; but their output is still so small they are considered ‘‘under- 
studies” to North Central Texas. The Southwest or Mirando district, of 
steadily growing importance, is grouped with the Gulf Coast considered 
as a major field (see pages 31 and 33). Considered as districts, however, 
Gulf Coast and the Southwest are now statistically segregated. 


District and principal Output Total to District and main Output Total to 
field or pool in. 1924* «© 1925* field or pool in 1924* . 1925* 
TOP Owiell selon. 2 i. ater eeeenL tage 33.3 64.0 6.) Hull“ Chiberty2© os) saa 7.4 37.0 
202 Wortham: ees ase eee ee 0.9 0.9 
4) Mexiq=Curtie si. cseia nc eta 11.6 Teo 9 West. Columbia.ix.% oe 4.8 54.2 
13 Ric hla da tepet eh caeuret see 3.4 Si4 10 Goose.Creek (Harris)... 4.3 boa 
Mexia or East Centraly.. 46.0 IBS AN Ds 
a ———— i -Orange” County <2 see 4.2 15.9 
Ware WO CEL A asa eo nec TU aa ur a ae icvees 
UPON ey AE aS Keo IA eh oe cL AS en nance L4H le CE arrichs «ieee 222, 94.9 
8 Burkburnett seo is one ur OD 108 9 : 
Zo wvAreher:COURTYixk scam oe Vs 12.6 16 Sour Lake (Hardin).... ‘1.6 se OoLe 
Electra or North Texas. 29.0 228.0 22 Saratoga “(liberty )=).e..4 -6 24.3 
SS Sa lava teasers cae a pre aaten 10.7 a Ea egy 23:<°Damon, Mound sc 24 ke id: 5.9 
Mirando ort Southwest... os eee ee ees 21-4 Barbers “Hill Se ae ere Wench 1.60 
5 Stephens County........ 6.2 94.0 Spindle-"Top?...- 5.4 85 48.35 
18 Shackleford County..... De 2iter, Wie sc etere Batson sue: See ccee en eee vou 32.0 
12 Ranger-Eastland ........ 3.5 54.0 Blues Ridge: 3. eee wool 2.3 
Ranger or North Central} 12.5 184.0 Gulf Coast district.:..>i% 27.6 442.4 


The Gulf Coast Has a Great Record. Up to January 1, 1926, the Gulf 
plains belt had produced practically 512,000,000 barrels of oil, beginning in 
January, 1901. About 12 percent of the total was derived from Louisiana. 
The Humble pool is both the largest and the most productive to date. West 
Columbia contributed the most per acre. The following summary is from 
The Oil & Gas Journal, February 4, 1926. | | 


* Million barrels. {Includes miscellaneous under total for each district; the preceding 
numbers refer to the recent rank of each district, exclusive of South Liberty, developed 
in 1925. The above data are from a paper by F. Julius Fohs read before the February, 
1924, meeting of the Am. Inst. of Min. and Met. Engrs. He prophesied the finding of the 
Wortham pool and the expansion of Luling production. 

t Includes Big Lake in Reagan County which produced 1,060,000 barrels in 1924. It 
belongs to the Marathon district figures for which are still combined with the totals for the 
Ranger or North District. 

(Footnote on the Luling pool: see table on page 165) 

It gets its oil from the Edwards lime, 40 feet of which is productive at about 2,100 feet. 
The field has a beautiful setting in a farming region. It is almost monopolized by the 
United North and South Oil Co., organized by a nonprofessional rubber magnate, Edgar B. 
Davis, of Brockton, Mass. His persistent wildcatting at a cost of $1,200,000 for three years 
was finally crowned with success on August 9, 1922. His was one of the best exhibitions 
of financial nerve in the history of oil, according to James McIntyre in The Oil and Gas 
Journal, May 15, 1924. 


OILDOM: ITS TREASURES AND TRAGEDIES 167 


GROSS PRODUCTION FROM THE GULF COAST BELT, 1901-1925, WITH AREA 


AND DATE 

Year Area, Million Year Area, Million 

Name of pool opened acres. barrels Name of pool opened acres. barrels 
Spindletopea..ee uss 1901 240 48.8 West Columbia...... 1917 785 57.5 
SOUL ea. es uoke cree 1902 1,200 66.8 ETAL Dae ee teen a cee nce ae 1917 1,500 44.2 
JeENDUNICH et Litka)iarerel evict. 1902 750 85.9 Bat beta ELI loess are ee 1918 25 0.7 
Batson im. ctere true Oa as 19038 650 32.5 Blues Rideewewin..: sk 1919 410 2.0 
DALALOP AR cteste ossicles 1904 1,125 30.0 Pierce Junction...... 1921 205 3.0 
Hrninible fin sect aicle 1905 3,200 75.8 Big wGreékes ceases 1922 425 0.6 
Welsh-Anse, La. B... 1905 ake 0.8 Pica Lelandects. toc ele 1922 180 0.2 
Dayton. trae ace cee 1905 125 0.7 Stratton Ridge....... 1922 50 .03 
Vintone (uas)h aceee at 1910 1,500 26.6 ockport)-(Liak) .. o... 1924 Sie 7 
Goose Creek......... 1912 2,050 53.0 mouth Giiberty: 5... 1925 750 4.7 
OPranrese rr pscamee s Y 1913 1,825 230 BONS oe oie iets here aoe 1925 ate .04 
Damon Mound....... 1917 255 6.0 Ricdras sb intasess: sacs 1925 a3 .01 


A GULF COAST POOL, 
GOOSE CREEK, 


25 MILES EAST OF HOUSTON 


Opened in 1908 with a 1,600- 
foot well of 800 bbls. Big de- 
velopment began in 1916, at 
2,030 feet before 30,000-bbl. 
gushers came in at 3,000 feet. 
General area, 2,050 acres; pro- 
ductive, 880:.acres with acre- 
yield about 63,000 bbls. to end 
of 1926. In 1918 led Humble, 
producing 6,348,000 bbls. With 
over 7,000 bbls. daily in Novem- 
ber, 1926, Goose Creek ranked 
fourth among Gulf Coast pools, 
Spindle Top having over 90,000 
bbls. ; Hull, 20,000; West Colum- 
bia, 8,500; Orange, 6,700 and 
Sour Lake 6,300, out of a total 

—The Oil Weekly of more than 175,000 bbls. 
aily. 

The year 1926 marked an era of deeper drilling on the coast. Through deep wells, some 
below 5,000 feet, Spindle Top was rejuvenated so that its 1926 output is estimated about 
equal to that of its banner year 1902, when 17,420,000 bbls. were produced. At Goose Creek 
a Gulf Production Co.’s hole had reached 5,600 feet in November. The deepest producer 
east of California was reported in Cameron Parish, Louisiana, about 5,800 feet deep. 
The Gulf Coast field reached a new high peak in 1926. 


A TRIUMVIRATE OF PETROLEUM STATES 


Three-fourths of Petroleum Produced by Three States. Single states in 
a few instances contribute at least half or nearly half in the output of 
certain commodities. Thus California is the source of 85 percent of the 
placer gold! Florida, of 65 percent of the phosphate rock; Minnesota, of 
59 percent of the iron ore; Vermont of 48 percent of the marble; Arizona 
of 46 percent of the copper; Pennsylvania, of 46 percent of the slate and 
practically all of the anthracite. Very rarely is the degree of geographic 
concentration so great as to permit no more than three states to control 
at least 75 percent of one raw product as is the case with crude oil. Cali- 
fornia and Texas practically monopolize the production of quicksilver, 
Texas and Louisiana that of sulphur, California and Nevada that of borates, 
and California and Washington that of magnesite. In 1922 and 1923 the 
three states of Minnesota, Michigan and Alabama supplied respectively 97 
and 92.5 percent of all the iron ore mined in the United States. Naturally, 
since the bulk of the tremendous increase in petroleum production of the 
United States during the past few years has come out of California, Okla- 
homa and Texas, the percentage control by these states has also increased. 
They contributed 69.4 percent in 1920, 70.5 percent in 1921, 73 percent in 
1922, 76 percent in 1923, and 75 percent in 1924 when the total output 
fell off. 


168 OILDOM: ITS TREASURES AND TRAGEDIES 


Each of the Three States Supreme in Some Feature. California de- 
livers oil at tidewater at lowest cost because it produces most oil from 
fewest wells and over half of it less than 30 miles from a sea port. Okla- 
homa leads in output of light oil and hence in total value; but having more 
than twice as many wells as California and Texas together is handicapped 
by higher costs of development rather than of pumping. Texas obtains 
petroleum from the greatest variety of structures—anticlines, fault zones, 
salt domes, etc.—and from strata differing most widely in age and depth; 
hence offers crude oils of great range in quality (pages 28, 33 and 36). 
This state, as observed in the table of comparison below, has an extent of 
possible but unexplored oil territory greater than the total area of Okla- 
homa. F. Julius Fohs declared that, as California has very restricted areas 
in which undeveloped pools or deeper sands are likely to be opened; Texas, 
although now third in production, because of its large undeveloped areas, 
within five years should rival Oklahoma for first place. 


COMPARISON OF THE THREE GREAT AMERICAN OIL STATES, 1924-1925 


Points of comparison California Oklahoma Texas 
Area in square miles (land and water)................ 158,297 70,057 265,896 
Area” possible: ofl: DrOVIMCES sivas.) vntecese oe aliereelae aaa 1,500 30,000 80,000 
Area: “proven: and. probablewick eevee eae ee 182 1,800 2,500 
Area’ producing * during L925 eee hectare ee eae cee eee 100 1,250 500 
Usual range in gravity of oil.......... degrees Baumé.. 10—40 28-43 18-41 
Number “producing,salt ;domessc 7 os anced eee eee None None 24 
Number producing areas altogether............8....... 3b 175 110 
Daily yield, leading pool, June 30, 1925........ barrels... 108,000 57,000 47,000 
Daily yield, entire state, June 30, 1925.......... do..... 650,000 450,000 425,000 
Leading “county. late? L926 ie es Src aselets oie tonal el ease teen ee Los A. Seminole Hutchinson 
Second: county; Tated1 926 iegsce ir csore eres wioiioie etgen s Wareueiastaboesis cis Kern Osage Jefferson 
Daily yield, leading pool’ or area, late 1926...... do... 95,000 111,000 148,000 
Daily yield, entire state, late 1926......00...%..5.. do.... 660,000 540,000 630,000 
Number of counties with oil and gas................... v4 45 70 
Number ‘producing swells, VO25. .heron ce aie te fe ee rien 11,500 62,500 17,600 
Daily ‘yield* per -well}vAprilj 1925 Rocce sen nets barrels.. 52 ‘24.4 
Population, January. 1, 1925.2 20, we ie cieen millions. . 4 22 5.1 
Peré capita production. 01924 occ sw cleo eiseeter seers els barrels.. 58 718 26 
Per capita production to January 1, 1925......... dome 525 760 195 
Total output to January (4 e920. million barrels.. 2,550 1,975 1,300 
Year of commercial discovery. .........22cceeceecesees 1875 1891 1889 
Year output passed: 15000; 000 fas eas eaciover sateen 1895 1904 1901 
Outpure vin 190 Veer ere eer million barrels.. 39.8 43.5 12.6 
Ratio ‘of: 1924 soutput-to7 adOVe cc saci ieree cle ee ucla hac eteeinesegls 6 4 10.8 
New. wells inifive wyears,- LO L024 rig oe inter te etetenaal istie clea ale 4,331 31,516 26,162 
Percent) dry” holes of% abOVe sta ae ee ae ae vies ee eerie sin eee eae 15 31 
Refining Capacity; crude; ‘daily 2.) oo ieee scaled vs. aii ences 744,000 349,000 567,000 
Refining capacity, percent, United States.............. 25 12 19 
Motor vehicle registration, January 1, 1925............ 1,319,000 374,000 802,000 
Number of persons per motor vehicle.................. 3 6 6.3 
Number of miles surfaced roads............ecceseeeeee. 14,275 2,461 14,883 
Crude yield per motor vehicle, 1924............ barrels. . 176 467 168.5 
Reserves underground*................-- million barrels. . 2,800 2,100 3,500 
Pipe lines (trunk and gathering) Jan. 1, 1924...miles.. 4,539 17,384 12,044 


* Materially modified from the estimates offered on page 39, in the light of later develop- 
ments. Since the above was written there has appeared, August, 1925, ‘‘American Petro- 
leum Supply and Demand,” published by McGraw-Hill Book Co., New York, for the Ameri- 
can Petroleum Institute, 250 Park Avenue. Price, $3. 


THE DISTRIBUTION OF REFINERIES* 


Principles Concerning the Location of Petroleum Refineries. These are: 
(1) Nearness to domestic markets; (2) proximity to producing fields, and 
(3) accessibility to tankers for receiving crude oil and for shipping refined 
products by water. The first and third are sound economic reasons, for 
they permit respectively shorter railway hauls on refined products and low 
freight charges on the shipments overseas or coastwise. Realizing this, the 
leading refiners have spotted 16 out of the 22 largest plants either along 


—Standard Oil Bulletin 


A MODERN REFINERY ON SAN FRAN- 
CISCO BAY 


This is one of two 100,000-bbl. plants of the 
Standard Oil Co. of California—this one at 
Richmond, the other one at El Segundo, near 
Los Angeles. 


By absorbing Pacific Oil Co. in 1926 the 
California Standard further strengthened its 
position ‘as the principal refiner and marketer 
on the Pacific Coast and as the world’s second 
in refining capacity. 


As an aid in aviation, the Richmond re- 
finery may be identified from the air. At the 
left is shown one of the land beacons on the 
air route between New York and San Fran- 
cisco. 


tidewater or near the mouths of navigable streams.* The territory around 
New York and Tampico illustrate respectively (1) and (2) (see page ..). 
The Los Angeles district illustrates all three principles. 

Influence of Life on Location in Field. Unless an inland pool or group 
of pools constituting an oil field gives promise of long life it is not a good 
business practice to place a refinery where the raw material is produced 
except where also centrally situated with reference to regional or local 
markets. Tulsa, the capital of oildom, contains in her suburb west of the 
Arkansas River, the Cosden refinery which is the largest in the Mid- 
Continent field. As will be seen in the table herewith, this refinery is hardly 
two-fifths the size of the average for the six foremost refineries which are 
all located along water fronts. In general, only refineries of limited 


* “The location is a purely economic problem, but with the unfortunate corollary that 
with the slowly changing cycles of industrial development the program which, in a par- 
ticular territory is most profitable at a given time, may, however, become decidedly un- 
profitable a few years later. It would appear both logical and economic to build a. refinery 
in the heart of its market.*’ Charles E. Bowles, in the Oil and Gas Journal. 


170 OILDOM: ITS TREASURES AND TRAGEDIES 


capacities and of the skimming type are located inland near the sources 
of crude supply. Perhaps the proper solution will be to build portable 
plants; then there will not be so many refineries shut down in the oil fields. 


LEADING REFINERIES AND THEIR POTENTIAL CAPACITIES IN THOUSANDS OF 
BARRELS, JANUARY 1, 1926 


Capacity , Capacity 
Operator and location Operator and location 

Gulf ReftCo: Port: Arthur lexn.28c es. 102 Shell Co. (Calif.), Martinez, Calif..... - 40 
Standard (Calif.), Richmond, Calif..... 100 Midwest Refining, Casper, Wyo......... 50 
Standard (Calif.), El Segundo, Calif.... 100 The, Texas..Co., Pts Arthur, Texs. 23. re BO 
Standard-.(N-2d2)2 Bayonne, Nu dis oe 100 Magnolia P. Co., Beaumont, Tex:....... 45 
’ Standard (La.), Baton Rouge, La...... 60 Tidewater O. Co., Bayonne, N. J....... 36 
Standard GNo- Ss.) Gimdens Ns dis aves acs G5 Union Oil Co., Los Angeles, Calif. ....-;. 40 
Standard» (ind!) “°Wihitine slid. sce 50 Standard: (N2 J:); Baltimore, Mdl.3.22% 32 
Pan American P. Co., Watson, Calif.... 70 New Eng. O. Ref., Fall River, Mass.... 30 
Associated Oil Co., Avon, Calif. .2...... 50 Roxana Pet. Corp., Wood River, Ill..... 30 
General Pet. Corp., Vernon, Calif....:. 50 Cosden & Co., West Tulsa, Okla........ 35 


Atlantic “Ref.. Co., Philadelphia... .°.. 5... 50 (Now Mid Continent Oil and Gas.) 


Only 3 out of these 21 are not complete refineries. 


The Three Leading Oil States Have 57 Percent of Refining Capacity. 
California, Oklahoma and Texas contributed together 75 percent of the 
crude oil produced in the United States in 1924, but on May 1, 1925, they 
had but 57 percent of the total refinery capacity. The two states on tide- 
water can refine 30 percent more crude than they now produce. Oklahoma 
can skim or otherwise refine 100,000 fewer barrels per day than it was daily 
producing in April, 1925; and on May 1, 1925, refineries with 30 percent of 
the total capacity for the state were shut down. It is plainly more profit- 
able to pipe the crude oil to waterways than to pay railway rates on 
products in containers or even in tank cars. How overbuilt is the refining 
capacity of several states besides Oklahoma is set forth in the column of 
the table below headed ‘‘Per cent shut down.” (See page 84.) 


No. of Daily Percent 
refin- capacity shut 


States eries M bbls. down Principal center 
tes Chit OYA eel etge eho dent cceaaee 87 744 5 - Los Angeles County 
Dei ORAS rue ton Wiccan Menu g aca nEe y 113 567 16 Port Arthur-Beaumont 
320 Ol lahoniains soiuca-eeoaeeat ees 93 349 30 Tulsa and West Tulsa 
Ae INQ: 2) CL SOY ..38h ceo sine types 05, 0% 6 243 2.5 Bayonne-Jersey City, ete. 
ys PAUOUL STAM eats uc Nire eee eat ors 26 166 12 Baton Rouge-Destrehan 
Ghwhennsylvaniars.c.ccu eee nee 59 144 Onl Philadelphia 
MSNA SAS es sak ere ed eee 34 dbp iele = 16 Arkansas City 
Bisel WW VOM Ln eels oiecrn eee oe 16 100 6.7 Casper (Natrona County) 
OVS NOis aie i sawions nake Sees 14 90 15.5 Wood River 
MO nidlani ai’ ei ce aectec are. teh 6. 76 6.5 Whiting. 
His Massachusetis# sa. fone 3 52 0 Fall River 

Totaly sh states: occrc stems 457 2,668 In ey 


Other: LOM states es acre ees 97 267 tC. 


Maryland has four refineries with 45,200 barrels daily capacity, 84 per- 
cent at Baltimore. Ohio, the 18th state in refining, has 13 plants of 45,000 
capacity, half at Toledo. Arkansas ‘lately passed New York in total 
capacity—36,000 barrels, half at El Dorado and 38 percent shut down. 
Kentucky, Missouri, Rhode Island and Montana each have a greater 
capacity than West Virginia. South Carolina, the 21st state, can refine as 
much as Virginia and Utah together. Georgia can refine more than Iowa 
and Colorado. Minnesota, New Mexico, Arizona and Tennessee distil 
trivial quantities.. Last or 31st is Mississippi. Thirty percent of our 
domestic distilling of crude oil is done in the three great refining regions, 
the Los Angeles district (including northern Orange County), the New 
York Bay area and the Neches River from Port Arthur to Beaumont. 


OILDOM: ITS TREASURES AND TRAGEDIES Pen) 


CHAPTER IX—GEOGRAPHY OF THE MARITIME TRADE 
TANKER TRANSPORTATION 


‘ Learn up geography—work out your sums, 
Build up your commerce, and pull down your slums; 
“THE Sail on a tanker that marks a full hold; 
TRADE Your overseas trade means a harvest of gold. 
WIND Bring in the crude oil and asphalt you’ve bought, 
CALLS” But send out refined the raw you import; 


Trade your inventions, your labor and sweat, 
For your overseas traffic will keep you from debt. 
—Modified from Our Merchant Marine, H. C. Wiltbank, Editor, Feb., 1923. 


Preponderance of Tankers in Our Merchant Marine. From the table be- 
low it appears that 40.3 percent of the total privately owned deep-sea ship- 
ping (counting only vessels of 1,000 gross tons or more) consists of 
petroleum tankers. In the foreign trade, however, the American tankers 
are even more important since they therein make up 44.3 percent as of April 
1, 1924. This accounts for the fact that the foremost commodity in the 
foreign trade and total trade of the six leading seaports in 1922 and of 
seven in 1923 consisted of mineral oil and its products (see pages 20, 21 ..). 
Accordingly, the sudden cutting off of our immense foreign trade in 
petroleum would mean a calamity not only to American shipping but also 
to many sea-ports and refining centers located particularly along the 
Atlantic coast. Considering tankers alone, 32 percent of them were em- 
ployed in the foreign trade during the spring of 1924, or if the idle tonnage 
be excluded from the total, then they made up 35.7 percent of the total. 
This total covers both Government and privately owned tankers. 


SUMMARY OF UNITED STATES STEAM AND MOTOR VESSELS OF 1,000 GROSS 
TONS AND OVER, APRIL 1, 1924 


Total both owner- 


Privately owned Government owned ship 
M gross M gross M gross, 
Tanker service Number tons Number tons Number tons 
Latin-American (90% Mexican).... 90 516 5 25 95 5Al 
Transatlantic (KHuropean W. coast). 17 108 (it Rn cae Seed BS a by 108 
Transpacific (93% Oriental)....... 12, 95 ee 6.5 13 101 
TotalMin=foretem trade... 4. 2+ 119 719 6 31.6 125 750 
Coastwise: 
YG Si bal c POMBE eben ego Rede RI a 80 450.2 1 6.8 81 457 
IRC iiGe See ec ee AR lees ie 24 120 3 20.1 27 140 
tnterGoustalys: sir eis oe ss | Waysies Fi 682 * 10 67.4 97  FA9 
ERA TLE TNs eats cect onc. cicases cde, tiova’s eles ache 2 9.1 1 6.6 3 yer 
Total in domestic trade.......: 1938 1,261 15 100.9 208 1,362 
MotAlin oreione trade, 2... sss > 119 GES 6 31.6 125 750 
Pia idaetipaVeCeselsmaccd tile cheust ctr ase ad 24 83 29% 149.5 53 235 
Ramet aAnIceren oie aegis is die aun eos ae 336 2,063 50 282 386 2,345 
Nontanker service: 
J abi ee 14) 0119 2 sacl ya ener enol Hee 592 2,281 1,191 5,0217 1,783 7,602 
BASSET SCORER Har site chee tc ote eeu Sk 165 Tag Pecos 467 198 1,244 
Total Merchant Fleet......... 1,093 5,121 1,274 6,070 2,367 11,1915 


* These 29 include seven concrete tankers. 

7 The total number of Government freight vessels (non-tankers) include 842 laid up 
vessels with total gross tonnage of 3,517,341. 

~ Exclusive of two and one-half million gross tons in the Great Lakes commerce and 
a smaller tonnage in the river trade of the interior. ; 


172 OILDOM: ITS TREASURES AND TRAGEDIES 


FIRST TANKER OF 
COLOMBIAN CRUDE 
OIL 


Them 0 7 Je Walllamisy @ 
Capt. F. Hultgren, in 
July, 1926, cleared the 
port of Mamonal in Co- 
lombia (near Cartagena) 
with 80,000 bbls. of. oil 
from Las Infantas field 
for Bayonne, N. J. See 
Chapter xX and U: °:S. 
Commerce Reports, Au- 
gust 23, 1926. 


—The Lamp 


Extensive as the tonnage tankers engaged in foreign trade appeared to 
be, it was practically equalled by that engaged in the domestic intercoastal 
traffic, meaning the traffic through the Panama Canal in 1924. Looking at 
the closer classification, the tanker service resolves itself into the following 
leading groups towards the middle of 1924; based upon the active tonnage 
as 100 percent: 


Percent ° Percent 
Domestic’ intercoastal. oo... ci eee eo 35.5 Pacific coastwise (domestic)........... 
Ratin=Aimericans near me tee oer eee PASSE Transatiantie ne eee seis Penguin aera tea 5.1 
Atlantic coastwise (domestic).......... AB até Transpacifie 22.0) ie ti cct@acoiea one ae 4.8 


The Movement of Minera! Oil Through the Panama Canal. This move- 
ment, especially eastwards, gained momentum during the past five years 
on a scale unbelieveable. It culminated unquestionably in 1923 when 64,- 
000,000 barrels of California petroleum passed through the man-made 
waterway. This was but little more than the Pacific coastwise movement 
out of Los Angeles harbor, mainly to refineries near San Francisco. It 
was the shorter distance between these two ports that explains why less 
than one-fifth as much as the tanker tonnage occupied in domestic inter- 
coastal traffic could carry almost 60,000,000 barrels of oil last year to the 
former metropolis of the Pacific Coast. It will be noted that not all of the 
oil passing through the canal was domestic intercoastal. Much of the 
movement was to Mexico for the purpose of keeping its refineries busy in 
view of the changing comptexity of the Mexican production (see Chapter 
X. The Panama petroleum traffic eastbound was only 16,000,000 barrels 
or 22 percent less than our. Atlantic and Gulf Coast imports of Mexican, 
Peruvian and Venezuelan crude oil in 1923.* 


American Oil in American Bottoms; Other Goods in Foreign Bottoms. It 
is a source of pride to the American petroleum industry that it is prac- 
tically independent of foreign bottoms in the marine transport of mineral 
oil. On the other hand it is a source of disgrace that for 60 years, or 
since the close of the Civil War, the United States foreign trade as a whole 


* Of all forms of petroleum the Pacific to Atlantic traffic was 9,720,000 tons, or 50.8 per 
cent of all commodities in the fiscal year ended June 30, 1924; it was 5,990,000 tons, or 
36.3 per cent in the fiscal year 1925, and 5,785,000 tons, or 32.7 per cent in the fiscal year 
1926. Only 1,080,000 tons, or 13.8 per cent, of the west-bound traffic was petroleum in 
the fiscal gern 1924; 950,000 tons, or 12.8 per cent, in 1925, and 720,000 tons, or 9 per 
cent in 1926. 


OILDOM: ITS TREASURES AND TRAGEDIES 173 


has been at the mercy of foreign shipping in the carrying of commodities 
in and out of American ports. This condition was worst during the 15 or 
20 years preceding our entry into the World War, for in that period we 
rarely transported as much as 10 percent of our combined exports and 
imports. An era of ship-yard expansion ensued, first to furnish warring 
nations with new vessels, and next to build a bridge of boats* to carry some 
of our own supplies and troops across the sea. 


A recent high point in self-sufficiency was reached in the fiscal year 1920 
when ships flying the American flag freighted 42.7 percent of our exports 
and imports. In that year our foreign trade attained its peak value of 
almost $11,875,000,000. From that high point the decline has been rapid. 
During the fiscal year ended June 30, 1922, we hauled hardly 35 percent of 
the goods involved in our foreign trade despite the drop in the total value 
to $5,523,000,000. In other words, more than 65 percent of these goods were 
carried in bottoms owned abroad. Altogether between the end of the Civil 
War and the beginning of the World War 85 percent of the $83,585,000,000 
value of cargoes coming into and going out of the United States was 
transported in foreign ships. Said Governor Parker of Louisiana quite 
lately: “It is a pity to see the greatest producing nation depending upon 
foreign bottoms for the transportation of its agricultural and manufac- 
tured products.” 


Function of the Tanker Fleet in Time of War—Treasure vs. Tragedy. Our 
country was indeed fortunate to find itself in possession of a formidable 
tanker fleet at the time of entry into the war. Its importance can hardly 
be overestimated (see cut, page 39). Would that the rest of our mer- 
chant marine were as ready for emergencies! Mr. Hughes, while Secretary 
of State, said, “An adequate merchant marine effectively maintained would 
not only promote the commerce, but would support our influence abroad, 
and constitute a bulwark for the safety of the nation.” Secretary Mellon 
made the remark “that all patriotic Americans wish to see our country 
restored to her rightful place on the seas.” The American tanker fleet 
almost alone and for a long time has been the means of maintaining our 
prestige abroad. Were it not for one such fleet—the one operated by the 
Standard Oil Company of New Jersey—no American ship line would rank 
among the first forty in the world; and the American Tanker fleet has 
never been subsidized one cent! Nevertheless it was the bulk-oil boats of 
both the Pan-American} and the Standard which successfully and with con- 
siderable sacrifice met the emergency call for liquid fuel during the late 
war. 


* "Across the sea A bridge must be 
Of boats to freight Our troops though late 
Procrastinate Through party hate 
Bids fair to wreck Our Nation’s deck.” 
—From ‘‘We Must Unite, The Foe to Fight,’’ by O. H. Reinholt. Published in The Madison 
Democrat, March 28, 1918. 


+ “Martyr we made you, the next E. L. D. 
Whose vigor and vision helped bring victory 
Through oil well and tanker and refinery 
Owned by Mexican Pete, well known on the Street.’’ 


{The Sun Shipbuilding Company’s yard at Chester, Pa., has built more tankers than any 
other plant in the United States. Its President is John G. Pew (page 89), and its 
Vice-President Robert Haig, a cousin and namesake of the hero of Vimy Ridge. 


174 OILDOM: ITS TREASURES AND TRAGEDIES 


TONNAGE OF FOREIGN TRADE IN PETROLEUM 


Comparison With Other Commodities. 


The Division of Statistics, 


Bureau of Research, U. S. Shipping Board, has supplied the following 
figures for the fiscal year ended June 30, 1924, showing the number of cargo 
tons (of 2,240 pounds) of the leading commodities imported and exported, 
arranged by the author in the order of quantity, thousands being omitted: | 


Imports 
i Orudenpetrolemiih acts cette rece e sccosre 14,382 
DNV VG a isa e Gace click Day anata cs Hema es ees 3,902 
Soda b eats hair ee MPa Re eg Cee Meets oS rere 3,355 
ALERT PON VOLE aie ess tts toy ee eae eee 2,484 
bo slLocswanGg sluniberres ni eee et ae 1,438 
GBA a mals ise scttecat hele winks oigice ee eretea 1,099 
fomNitrates:; CChUE 2) ieee ae es cere 9/1 
Sc Molasses ioe ose ee rare aes ete 891 
D2 FP COMmes men Saito oe ee ee 672 
10 Vegetables and products......... 655 
Exports 
1. Petroleum and products 2c. scenes 12,937 
22 Coale and: \COKe hs kas wate cilcke Gee te 9,937 
SreuVV HOSES RAG s shore ees Gear ie te gennemreeee 5,369 
AS VOM Der Goes eee om oats neat eee 4,584 
5ckW heat: fours sc. See Se eee ee 1,966 
6 Iron and steel, incl. mfrs........ 1,354 
(Raw CottOnore wavs vo etl eee nie 1,301 
SIGN tOres assse ties easel tee ee 1,014 
0-= Phosphates Sic. eee his ee 836 
10 Meat, fish and dairy products.... 732 


Tremendous Increase Over Pre-War 
Imports of Crude. How great has been 


the growth in our domestic and export . 


demand for petroleum is evidenced by 
the tenfold increase in our imports dur- 
ing the decade ended with 1922. Our 
annual imports of crude oil averaged 
2,000,000 long tons in the 5-year period, 
1909-1918; a little over 21,000,000 tons 
in the two years, 1921-1922; dropping 
to hardly 138,000,000 in 1923-1924. Re- 
ceipts of refined mineral oil, as else- 
where explained, have also risen rap- 
idly, from the pre-war average of less 
than 100,000 long tons to nearly 2,000,- 
000 tons average in 1921 and 1922, and 
to 2.4 million tons in 1928 and 1924. 
Other leading imports in respect to 
quantity stood almost stationary dur- 
ing these periods, cane sugar amount- 
ing to 3.5 million tons in 1909-1913 (5- 
year average) and practically the same 
(8.7 million tons) in 1923-1924, with a 
peak of almost 5,000,000 tons in 1922. 
Pulpwood increased from 1.8 million 
tons to 2.4 millions; iron ore from 2.4 
to 2.6 (millions), and wood pulp from 
half a million to 1.4 million tons. It 
thus appears that, despite a temporary 
drop in crude oil imports, the average 
annual tonnage thereof and of refined 
oil during the past two years made to- 
gether almost half again as great a 
tonnage as the total of the other four 
out of six leading imports. 


SHIPYARD OF SUN SHIPBUILDING AND DRY DOCK CO., CHESTER, BELOW PHILADELPHIA 


OILDOM: ITS TREASURES AND TRAGEDIES 175 


_ Where the Imports Came In. In the table below are shown the receipts 
of the four leading imports according to weight, distributed by coastal dis- 
tricts for the fiscal year ended June 30, 1924. As indicating one cause of 
our chronic dental troubles, it may be stated that all our crude oil imports, 
constituting one-third of all our imports according to quantity, make but 
eight (8) percent of the world’s entire production of oil; whereas, our 
imports of almost three and one-half million tons of sugar make fourteen 
(14) percent of the world’s overproduction of such sweet stuff. 


Percent 
District * Iron ore Sugar Wheat Crude oil Total erude oil 
CHILL cy ore hein ciel settee. 18 DOS Eon ble cs once. 7,103 10,205 70 
NORGE AD ISTICIC Hie o's Sreycre: lars 2,438 2,544 1.6 6,592 22,600 29 
BOUL -ALIANLIC: 6.2 ee 5 cress 14 4 Gis meen enters 675 1,666 40 
INO tlom Se 3 ao & ee ee 5] 76 0.6 1h 2,559 0.5 
ATCO RIM KES ae aioe ee cis oo chehe 10 ee 3,900 0 ey a 0 
2,483 3,354 3,902 14,382 42,750 33.6 


An inevitable conelusion is that mineral oils, notably fuel oil, are making 
absolute and relative headway at the expense of coal and coke. 

Where the Exports Went Out in 1924. The Gulf district has. generally 
led in the percentage which petroleum and its products have made of the 
total exports according to tonnage; but in both absolute quantity and 
value the North Atlantic district, the port of New York in particular, had 
held first place before 1923. The temporary leadership in percentage passed 
to the Pacific district due to the tremendous traffic out of San Pedro which 
in turn was caused by the extraordinary output of the Los Angeles basin 
during the past two or three years. 


Petroleum, Coal, - Wheat, All Percent 


District products coke flour Lumber exports petroleum 
Gualee ee Ces ceue stereo 4,665 92.6 683 1,782 10,524 44 
PeACIIG Atty eels o whetereus Sis: 5. 4,364 Beal 1,446 2,461 9,487 46 
North Atianticyeessr © x00 3,829 4,078.3 4,381 223 20,276 19 
Great GAKGS ils <ccc.dielas ole oes 33 5,563 823 12 7,980 0.4 
SOUL -ATCIATAL Cite nos oueiets 5 i's 45 201 bre 105 856 5.2 
DL Otal Met vkhsia weeties ele « « 12,937 9,937 7,384 4,583 49,122 26.3 


Several significant facts are brought out in the table above. Aside from 
the striking features relating to petroleum it appears that each district, 
except the South Atlantic, held a pronounced leadership in one of the four 
most important exports measured in tonnage. Thus 54 percent of the 
lumber shipments abroad originated on the North Pacific coast, while 60 
percent of the wheat and wheat flour left from ports of the North Atlantic. 
Of the coal and coke, 56 percent was carried from Lake Erie ports to 
various parts of Canada. These statistics relate to the fiscal year ended 
June 30, 1924, and sustain statements made elsewhere that fully one-fourth 
of all the exports from the United States is now made up of mineral oil. 


FOREIGN COMMERCE OF THE UNITED STATES, 1922-1924 
1. THE IMPORT TRADE IN PETROLEUM 


World’s Biggest Buyer of Crude. Contrary to the prevailing impres- 
sion, Uncle Sam is the world’s leading importer of mineral oil. But the 
import trade did not become important until a decade ago, that is, after 
the advent of Mexico into high rank as a source of fuel oil for the world’s 
fighting fleets and merchant marines.* In fact, not before the fall of 1923, 


* During the 5-year period, 1910-14, no refined oil was imported, and the crude imports 
made but three-tenths of 1 percent of the value of all imports. In 1922 2.3 percent, and 
.1928, 1.4 percent of imports were crude oil. 


176 OILDOM: ITS TREASURES AND TRAGEDIES 


when a cargo of crude oil came from the Maracaibo basin of Venezuela,+ 
was there any record of receipts of foreign petroleum other than Mexican 
(with minor amounts of Peruvian and Trinidad crude) at ports of the 
United States. Practically all of the imports listed below may therefore 
be credited to our nearest Latin-American neighbor; and all of them 
entered the United States free of duty. 


IMPORTS OF MINERAL OIL LAST THREE CALENDAR YEARS 


Thousands of barrels Value, thousands 
Articles Unit 1922 1923 1924 1922 1923 1924 
Crude petroleum .......... barrels... 127,000 82,000 77,800 $70,383 $53,882 $ 73,842 
Topped prod. (fuel oil, ete.) ..do.... 2,950 12,200 12,900 1,657 7,526 12,690 
Unfinished products ......... GO: 4,220 760 320 -10,705 1,690 950 
Finished light products...... dow st 1,480 4,550 3,430 5,440 14,803 13,000 
Illum. and lub. oils........... Goes 0 36 90 0 252 PAs 
Total liquid products....... do.... 185,650 99,546 94,540 $88,185 $78,153 $100,717 


Two Causes of Decrease. In 1923, by a mere coincident, 82 percent of 
the imports consisted of crude oil while 82 percent of the exports were 
refined products. The decrease in crude imports, absolutely 45,000,000 
barrels in one year, was due first to the great drop of 32,000,000 barrels in 
the output of Mexican wells and next to the stupendous rise of over 
175,000,000 barrels in the domestic yield. In 1924 the high rate of de- 
crease in quantity was arrested, as indicated and the total value of the 
imports passed the 100,000,000 mark for the first time. In 1925 imports 
fell off 17 percent to 78.3 million barrels from 94.5 million in 1924. Small 
increases occurred in the receipts of refined products. Of the liquid im- 
ports, 81.6 percent consisted of crude oil—62 million barrels. 


Reasons For Gain in Refined Imports. The 207 percent gain in quantity 
of finished light products imported in 1923 was not caused by any im- 
provement in the quality of Mexican crude oils. The latter averaged 
much heavier than in a dozen years due to a continued decrease in the 
production of southern or light oil and an increase in that of heavy or 
Panuco oil. This practical trebling in both bulk and value of such refined 
“imports may be explained by the diversion of some California light oil to 
the otherwise idle Tampico refineries in order to relieve the congestion 
at plants near Los Angeles. 

Position of Petroleum in the Import Trade. In the point of value for 
the calendar year 19238, seventeen, and for 1922, only seven other com- 
modities surpassed crude oil among the imports of the United States. 


THE EIGHTEEN LEADING IMPORTS INTO THE UNITED STATES 


(Values in Millions) 


Commodity 1923 1922 Commodity 1923 1922 
NOH 55 eer we em, nettles stared soe attetiee nea tire $392 $366 9. Burlaps,vgutemsec.si ures ae $67 $49 
Sucariucaneive ck nce 380 252 Veretablevoilsyicncw au nie ue 65 59 
COME ii oad ase aisHarh pale Nose 190 POLS Wertilizers line cee onc areas 64 45 
Rulbbersscrudeycasvseiie soca ue T85= 102° Lumber*( beards! ete) cesta. 62 46 
Wool mohair ee ees teehee cs 120 Si Tin’(barsfandbloek) |) oi. eee 61 AJ 
Hidéesandiskinsyicn : cst as eee 119 LOT Diamonds’: ii exten ecient ee eae 60 52 
Paperimewsprimtsicancs mam cremate 98 (2 Oba eos ra Ween eae he ee 57 66 
Murs + indressed 3% oc. eames 80 62"; Oopper, crude dsiaas ue eno 56 38 
Wood) pulp ea oe aoe (83) 63 Mineral oil, crude ............ 54 70 


— 


* Trade information, Bulletin No. 225, May 5, 1924, U. S. Dept. of Commerce. 

+ According to the Oil and Gas Journal, December 6, 1923, this was brought by the 
tanker ‘“‘Sabin Run’ for the Sun Oil Company’s plant at Sandy Hook. But Commerce 
Reports of November 19, 1923, states that on October 2 the third shipment of Venezuelan 
oil—68,000 barrels or 9,715 tons—was made to Perth Amboy, N. J., by the Curacao 
Petroleum Company. See view of first cargo of crude from Colombia, page 172. 


OILDOM: ITS TREASURES AND TRAGEDIES ny Agi 


Refined Oil Rose in Rank. Although partly accidental, yet suggestive of 
what the future holds forth, refined oil imports came up to 29th place in 
1923 from 32nd in 1922, while imports of crude fell off 10 places as stated 
above. The products of lawful distillation stood as low as 39th in 1921. 
In addition to the 18 commodities listed in the table, 10 other articles of 
import were worth more than the refined forms of petroleum: Raw cotton, 
flax-seed, cotton cloths, fruits, crude cocoa, tea, fish, vegetables, woven 
fabrics of flax and hemp, and nuts of all kinds. These 10 varied in value 
from nearly $50,000,000 for each of the first two down to a trifle over 
$25,000,000 for the nuts. Imports of refined oil amounted to $24,272,000 in 
1923 compared with $17,802,000 in 1922, a gain of 36 percent. This rate 
of increase was exceeded by that of two other mineral commodities, namely 
tin and unrefined copper. 


2. THE EXPORT TRADE 


Oil One of the Greatest Forces in Our Foreign Trade. As implied at the 
beginning of this chapter, and as claimed by good authorities* the petroleum 
industry has probably proven the greatest single force in expanding the 
foreign trade of the United States. With the notable exception of our 
sister republic to the south, in no other nation’s dealings with foreign lands 
does petroleum play a more important part.j As shown in a following 
table, in the value of exports mineral oil ranks safely second to only one 
other commodity, namely raw cotton. It contributes, therefore, a big 
share towards our favorable balance of trade. Moreover, in providing 
light, heat, and lubrication to the remotest corners of the earth, the 
American petroleum industry has increased the prestige of this country 
throughout the wide world; it has exercised a great civilizing influence 
and has increased the capacity of foreign countries to purchase other 
American products. 

Importance of Maintaining Foreign Markets. Exceedingly important is 
the export trade in American petroleum products. Its preservation and 
extension is very vital to the continued growth and prosperity of the 
American petroleum industry. Not only are the exporters interested 
therein, but the American public, the world’s principal consumer, probably 
understand by this time that reasonable prices for gasoline and other 
products are made possible by the higher prices and profits obtainable 
on the exports; and also, that, without a foreign outlet for our surplus 
kerosene in particular, any losses sustained through a domestic overload 
of this illuminant would have to be met through increased charges for the 
more popular products. (See pages 66, 84 and 85.t) 


— 


*“The Oil Industry’s Answer” (to its critics), reprinted from The Oil and Gas 
Journal, Tulsa, Okla., 1924. 

_} Rassia’s great oil industry was temporarily removed, as a result of the World War, 
from competition with the American industry which it led in production at the beginning 
of this century. According to Julius Klein, in U. S. Commerce Reports for September 8, 
1924, “the Russian industry has been struggling with ginorance, inappreciation, and poli- 
tical strife at home, and the competition of highly organized distribution in the world’s 
markets. During 1917-1918 much damage was done to oil properties ,and the nationalized 
industry handicapped for lack of labor, equipment, and technical personnel. But because 
of the richness of the Russian deposits, the industry has revived. In the petroleum 
markets of Europe it is (again) coming into competition with American products.” 

~ Read “Importance of Foreign Markets to the Petroleum Industry,” by Henry C. 
Morris in U. S. Commerce Reports, June 18, 1923, page 753; ‘‘World Looks to America for 
Petroleum,” by W. M. Dunham in The Oil and Gas Journal, November 8, 1923; “Export 


178 OILDOM: ITS TREASURES AND TRAGEDIES 


Patient Efforts Have Built Up the Business. To get an entry into for- 
eign markets for any American manufactured product is a difficult propo- 
sition, and the result is apt to become unsatisfactory unless the business 
is voluminous enough to warrant considerable expenditure of time and 
money. While the various Standard companies, notably those of New 
Jersey, New York and Vacuum, collectively still control the export trade 
(page 103), the leading independents and semi-independents, such as Gulf 
Refining, Pan-American, Sinclair, Sun Oil Co., The Texas Co., and Union Oil 
Company of Calif., in the course of 20 years have developed a large lucra- 
tive share therein, and this share has expanded surprisingly since the war. 
Their participation therein and the general exportation of refined mineral 
oils, should be encouraged since the latter serves as a sort of latch key in 
opening the door for American capital in the development of foreign fields 
upon which, in turn, we must draw increasingly in coming years to sup- 
plement the diminishing returns from our own deposits. 


Federal Interference to Restrict Exports. In behalf of the national 
defense a curtailment of petroleum exports is proposed through some legal 
measure other than an export duty which is unconstitutional. Any such 
artificial restraint is not regarded by the writer as advisable since it would 
prove at present disadvantageous in various ways. One reason is that it 
would permit, even if it would not stimulate, in the United States an out- 
rageously higher per capita consumption. In 1923, when our population 
approximated 110,000,000, each person on the average used about 240 
gallons or 5.7 barrels of mineral oil. This quantity is practically three 
times the per capita consumption in Canada, eight times that in the United 
Kingdom or in Mexico, almost 20 times that in France or Russia, 51 times 
that in Italy and 86 times that in Germany during the year 1923. (See 
tables on pages 15 and 191.) Furthermore, such restraint would prove a 
rude reward for promoting the expansion of foreign trade in other Amer- 
ican commodities, notably automobiles, which has followed the flag of our 
petroleum fleet. Probably no other American product has penetrated into 
so many out-of-the-way places as refined petroleum, from the South Pole 
to the Northwest Passage. (See pages 17 and 95.) The strongest argu- 
ment against unnatural restriction has been stated in the preceding para- 
graph. 

Position of Petroleum in the Export Trade. In view of what appears 
above it is not surprising to note that refined mineral oil ranks well ahead 
of all other exports with the single exception of unmanufactured cotton. 
Moreover, the article which stands third or next to refined oil is one that 
owes its development to the existence of a suitable propelling energy 
derived from crude oil (page 107). In former years, especially before the 
World War, copper and iron and steel stood highest among the exports 
of metals and minerals or their products; but now the new leaders are 
refined oil, automobiles, and coal. Among the exports of 1923, petroleum 
products were worth three times the value of refined copper and four 
times the value of cotton cloth. Even crude mineral oil, which ranked 
but 23rd in 19238, slightly exceeded cigarettes in value of exports, while the 
refined oil was worth more than twice as much as leaf tobacco. — 


—. 


Trade and the Investor,” W. F. Keyes in the Magazine of Wall Street, September 30, 1922; 
“Principles of Foreign Trade,” by C. E. Griffin (The MacMillan Co.) notes that the 
United States stood only 22nd in per capita foreign trade among the nations of the world 
in 1918. 


OILDOM: ITS TREASURES AND TRAGEDIES 179 


Uo“ 
Yy 


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AMONG MAJOR EXPORTS OF THE UNITED 


PARTS 
The annial value of both refined and crude forms of 


petroleum now (1926-1927) approximates $500,000,000. 


POSITION OF REFINED MINERAL OILS SECOND 


RAW COTTON 
REFINED MINERAL OILS 
WHEAT & FLOUR 
MACHINERY 
RAW COTTON 
WHEAT & FLOUR f 
AUTOMOBILES 
& PARTS 
AUTOMOBILES § 
& PARTS 
WHEAT & FLOUR | 
MACHINERY 


THE 24 LEADING EXPORTS IN 1923 (VALUES IN MILLIONS OF DOLLARS) 


Commodity 1923 1922 Commodity 1923 1922 

COLON EMV Fiichiele e clnieia,s aig acee $807 SOLA Bee BACON, cos cic ais wvslestvis mists ecclecs 1 $60 $52 
Mineral oil, refined ........... 327 Pek bbtot) eager ieee yt Ata rayt he oA 59 57 
IATTOSTV ANG Darts... .66oscceccce 166 98 TrOW" ANG’ StCel ee ic wicielesevetsvaleate cs 59 46 
CORTE cssttnekrne bale ase a Paka le mianeecs 154 91 Agricultural machinery ....... 50 26 
Peobacco: 16at Cis. sacs cs sete eee 152 TAGMee ICAL DOR Va cette ts carole ace nha Adee ere siare 43 45 
Ord eres ae sce wee one 133 94 Cornr (MAIZE) sew ere icicles ee olsss 37 115 
Wiheats (SPAIN)! cca isccs so. o10.8 116 206 MUPAYE were Ware olahetermieiuiiaee lors 29 70 
Copper, Fefmned fee cesiescwes ce 110 89 RVGR CONST Dee ie aware ie x sie cies 28 46 
WV Ehiesh ty TOLLE ie chat crete tere c asronesee odecei'e 88 85 Cottoniclothatactcswos ot «casts 26 24 
BORTOS EC DIANKS iy feiclec ws cte-c selects 81 57 CraudevVoila ti rcccs veveus alesse a + 18 
Cotton cloth ........ araigtels, ciels'a 79 BDU OCISAVECLGS Tem aicicld we cismiere suerenta nies 23 24 
UPU ES a cathe eta eterk' os kiele G.s-6 ds succes 67 A re MA wPANTICR: cate ein aleve a ele: mies 22 19 


Leading Seller of Distilled Liquid. Not only is the United States the 
world’s biggest buyer of crude oil but it is also the most successful seller 
of refined products. In 1923, according to the Department of Commerce 
(page 191), our country supplied almost 31 percent of all the petroleum 
products consumed throughout the rest of the world. For the first time 
in about 10 years the quantity of all kinds of mineral oil exported prac- 
tically equalled that of the imports. Since the imports were 82 percent 
crude and the exports 82 percent refined for 1923, a big balance in value is 
found in favor of the exports. This balance amounted to neariy 
$256,000,000 in 1922, and to $288,000,000 in 1923. 


EXPORTS OF MINERAL OIL DURING THE CALENDAR YEARS 1922, 1923 AND 1924 


Million Barrels Million Dollars 
Articles 1922 1923 1924 1922 1923 1924 
RiGBOUNGH NEDA, CLG, sitar este sie aiec et alge.e 13.8 20.1 28.3 $126.8 S137 $167 
ET OSO TIC Mian tray. cl eos nia ce ete dis edhe ins De abbas hes 20.2 21.4 83.1 76.6 88 
WFUDTICHLIMOMOI) Gon vies sss cle as ese dU s eee 7.9 8.3 9.1 76.6 76.7 86 
SSAA ATIC LUCIE OLE eto clo arse 5 d's ore sie\c o's 00 ole we 16.6 29.3 34.7 26.0 35.7 50 
CONKERS GST 00 ike ROI 8 pn en 10.0 17.0 18.1 18.3 PAs pik 26 
SERV LAL SURO We ceil tate in ai Sid.s, 6c oveiezs che sre, viele % 69.6 94.9 111.6 $330.8 $349.8 $417 
POORCE TC GEUTICCOMOLL cette tinieis(atela cis outreesie ie oats 85.7 82.1 83.8 94.5 93.4 93.8 
M short tons Values, millions Avge. 
Solid forms 1922 1923 1922 1923 2 years 
PRO DTICE LIN SIE CAHSEE ar cle sence che ois o'a8s oh i'el oie leo Lead =.8 eye 08 29.0 37.6 $3.1 $ 4.0 $ 3.6 
Bes Re oe EN ey sey ce etree gw ole: Ma Sienna mice aseuer ausieie 142-3 164.9 9.4 11.4 10.4 
Sia me TCM tL UNILCT MS icy 6 'e piel o ore) si n,witieys w:sonie wie ie eo) 66.0 95.3 ily 2.5 21 


NN —_——_——— m—_- 


Eyal PN eR crn 0 erg Chaiaha sieve. ee &: 6 igyosn Whe, oe aK 287.8 297.8 $14.2 $17.9 $16.1 


180 OILDOM: ITS TREASURES AND TRAGEDIES 


EXPORT DISTRIBUTION CHART 


FOREIGN COMMERCE DEPARTMENT, CHAMBER OF COMMERCE OF THE UNITED STA7ES 


Pm 


aera % rs) 55 3 ae ae j : 
SPAINeRS/ mL AS CHINA JAPAN 


if © 
Nisa cme Nag Py, e z » Th r Rie cs : ¥ ” Fi 
: eae SSenoMINICAN REP. pigs ile PAs Peon pier 4 
bh 5 We | AM ¢ Ss : ‘ va TE j e ’ ' ; ie 
he : Wine i uN AF Ca - ‘ 0 x 2 a 4 oH 
5 fs ) ey ; a za if 
a ® ‘ ir CA SS Py, 
tL Eppp >) 4 
Te) IGA S008 2 
H 0d0g9o 
@e9SOUTH ICA 


WoL, [ffi | tet 
NAPHTHA, %&> ; 7 


SN ‘< 


Gg [| || carl yriss2ia 


EACH |@ REPRESENTS $1,000, 0CO 
LIGHT PRODUCTS, EXPORTS| 1924: $167,846,637 
: “e + 2 ¥. — [a or 
Gar 
vy ae, 5 adh? 
Q Ba 
or Ds, <= pes) 
§ ‘ BS ) is 
| e eo Ae vaitleg ae ie [ 
| : 
QB : CANADE e0gocceee {2 , 5 
re : Soars ‘ ps BRLGIUM { oe nd sa ae i a 
26 eas ANE oe Cer 7 
: jue >To LG . “ogre i CHUA S e 
. i Od T INDIA fees 
laa MEXI odeys, c = oeee, NICKONG + 
\ PAINE Gay Vo |h MISEANDS. Ys 
2 3 x = mee. co 
x \ Ma t) aQst SNDIFS Spee nity eae 
oe quire vay : sTaaLIay\ ‘|? 
‘ ICA a 
LU RI ATI G long ARGENT INA : 
/ eS : 
OIL L. YR 19 


EACH |® REPRESENTS $500) 000 


TOTAL EXPORTS] 1924: $86,701,272 


: ior wo Ca ba or Ca io" so” 


Largest Values in Light Oils. The lighter distillates, gasoline, naptha, 
etc., constituted 39 percent of the total value of refined petroleum exported 


- 


OILDOM: ITS TREASURES AND TRAGEDIES 181 
/ 

during the two years, 1922-1923. Adding thereto the value of the kero- 
sene sold abroad, the total value of light oil exports exclusive of lubricating 
oil, made 62.4 percent of the value and 46 percent of the volume of the liquid 
petroleum exports during these two years. Foreign markets for illuminants 
and lubricants are quite stable, but the demand for motor fuel is growing 
rapidly in agreement with the gain in sales abroad of American autos and 
trucks. Domestic overproduction, more than any other cause, accounted 
for the great increase in shipments of gas and fuel oil, the volume of 
which, 31 percent of practically 4,000,000,000 gallons, exceeded even that 
of kerosene in 1923. This is verified by the fall in unit value of the fuel 
and gas oil exported, from 3.7 cents per gallon in 1922 and 2.9 cents in 
1923, or almost 22 percent. Excessive output also affected the average 
export price of gasoline, naptha, etc. This dropped from 22 cents in 1922 
to 16.7 cents in 1923, at the point of exportation. 


Recent Expansion in Export Trade.* The rapid rise in gasoline ship- 
ments to foreign countries has been indicated on page 109, up to the end 
of 1922. The gain for the calendar year 1924 over 1923 was 340,000,000 
gallons and for 1923 over 1922 was 266,000,000 gallons. The increase 
registered in two years thus totaled 609,000,000 gallons or 14.5 million 
barrels. This great gain was 105 percent of the actual gasoline exports 
during 1922. Such an enormous growth in two years has been unparalleled 
in history. It was due“partly to better conditions abroad and partly to 
excessive supplies at home. The increase for 1925 was about 100,000,000 
gallons, or nearly 9 percent of the gasoline exports in 1924. 


Shipments Abroad in 1925. Petroleum exports, exclusive of medicinal 
oils and similar products, declined in total quantity but increased in value 
to $471,000,000, which made 9.6 percent of all merchandise exports in 1925. 
The decrease in quantity was entirely due to a reduction of 4.5 million 
barrels in crude shipments. The refined oil total was but slightly higher 
in 1925, as shown in the comparative figures below: 


UNITED STATES EXPORTS OF PETROLEUM AND PRODUCTS 
(In millions of gallons, according to U. S. Commerce Reports, Feb. 15, 1926) 


Product 1924 1925 Product 1924 1925 
Refinedwoile: total, s.6s0c0ss 3,922 BPOD Re OVO OANOLL 62. oeape oe. omen fare 739 551 
Gasoline Clete sere oo bes cre 1,186 iP 2O0Mee Residuuma ClGra cc wcae cence 2.8 4 
WWeKOSENE pee ceters cate sie costa a aise © 917 877 Petrol. asphalt (tons)....... ae -08 
Cas ang tUel Oll ves atcicc se’ os 1,440 1,368 Lubr. greases (lbs.)......... 95 98 
EN DrICALING Ol! sieeciats wvaie'e cove 379 403 > Parafinvwax (lbs.)es. ina 383 334 


America Lubricates the World’s Machinery. The entire earth depends 
upon the United States to grease the machinery of industry, agriculture 
and commerce. We sell abroad relatively more of our lubricants, from 
axle grease to airplane oil, than the gasoline which we produce. Normally 
we can spare one-third of our lubricants but no more than one-ninth per- 
cent of our output of motor fuel. The table herewith brings out two 
interesting acts: (1) Both output and export of lubricating oils are 
stabilized; and (2) the percent of the product exported has a small range. 
Converted into barrels of 42 gallons each the 7-year totals become 162.5 


— 


* Total exports of mineral oil during the 20 years 1903-1922 approximate 954 million 
barrels or 18 percent of the domestic production. They increased from 22.3 million bar- 
rels in 1903 to nearly 70 millions in 1922, or 204 percent compared with 455 percent 
increase in production. For the geographic distribution of petroleum exports in 1924 see 
world maps made by the Chamber of Commerce of the U. S. and reproduced in this chapter. 


182 OILDOM: ITS TREASURES AND TRAGEDIES 


EXPORT DISTRIBUTION CHART 
FOREIGN COMMERCE DEPARTMENT, CHAMBER OF COMMERCE OF THE UNITED STATES 


129 ra Ca w v7 @ 


* DUTCH 
EAST THDIES® P=" 


crite 


HALANDS 


1924 


@ REPRESENTS $1,000,000 


TOTAL EXPORTS! 1924: ¢88,619,35 


é me 4! 
Oe ig t BN Rat 


8 
4 


EACH] @ REPRESE“TS $50p, 000 


TOTAL EXPORTS, 1924: $49,352,598 


million production, 55 million exports and the percentage practically the 
same as in the year 1921. 


OILDOM: 


“THE DARK CONTINENT” 
IS ILLUMINATED WITH 
AMERICAN KEROSENE 


Donkeys deliver the goods, 
ease oil in  10-gallon_ tins 
packed two in a box. This 
seene is laid at Port Elizabeth, 
South Africa, and shows native 
porters near The Texas Co.’s 
stores. 

—The Texaco Star. 


ITS TREASURES AND TRAGEDIES 


' this 


183 


CHINA OUR CHIEF MARKET 
FOR KEROSENE 


Uncle Sam supplies most of 
illuminant through such 
exporting concerns as the Stand- 
ard Oil Co. of New York, the 
Standard of New Jersey, The 
Texas Co. Standard Oil Co. of 
California, and the Union Oil 
Co. of California. This is a 
view of Texaco case oil being 
discharged at Dairen, Man- 
churia. 
—The Texaco Star. 


THE PHILIPPINES MUST 
IMPORT ALL PETRO- 
LEUM PRODUCTS 


After spending $1,000,000, 
Standard Oil of California 
failed to find a commercial de- 
posit of mineral oil in _ this 
part of the Malay archipelago. 
Borneo and Sumatra yield oil, 
and possibly some day the 
Philippines may likewise _ be- 
come a producer. 

—The Texaco Star. 


LUBRICATING OIL PRODUCED AND EXPORTED 1918-1923 


(Millions of Gallons) 


Year Output Export* Pet. 
1918 A Pics i ae ee 841.5 259.0 30.8 1922 
LO LON ears toveres3 ON, 846.8 DT A eee. 19238 
OD een meric Alves. Zicke.a: 3 1,046.7 405.0 38.7 1924 
LO Diltae 5 oteth Saad ad Aewslere chee 877.9 ASW INS © erie 


Seven years 


* Additional to lubricating grease. 


Ci? at Bp 


efle.is es 


Output Export Pct. 

By ch mg eR ee 331.4 34.1 
IS MAN earn 1,097.4 348.4 31.7 
RAP ah yee 1,154.9 382.0 33.0 
LO SO.Leeee OA Loose 


184 OILDOM: ITS TREASURES AND TRAGEDIES 


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Syag5_55 sz292525 23uyu82<48 222>558 ee ges 
Sskeeace F2Gscf& 2222286 sfieees | o ai 
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we aos Bes IPE EES. woe € 2 eee -2es 5 af 
5 Aa! 22:55 a Se aoe aq =e) 


OUR BEST CUSTOMERS FOR CRUDE AND REFINED OILS 


Great Geographic Range of Buyers. It has already been stated that 
American petroleum products, more than any other, have penetrated into 
the far corners of the globe. But while the distribution of such exports 
is very extensive it is not uniform since some customers need certain 
products more than others. Thus the United Kingdom took more lubri- 
eating oil in 1923 than France and Germany together, Canada more crude 
than all others combined, China more kerosene than any other three, and 
the United Kingdom and France together a little more gasoline than all 
the rest. Considering grand divisions, Europe is yet by far our best cus- 
tomer, but Latin-America—Cuba as well as Sotth Amercia—has lately 
made large gains in per capita consumption of our mineral oil. Germany 
was a huge consumer of American illuminating oil before the war. Now 
that the Dawes plan is operating, that country is getting back on her feet 
and reviving her petroleum trade. During 1924, due partly to increasing 
imports from Persia and partly to expansion in refining capacity, American 
participation in British imports began to fall off relatively.* Par- 
ticipation of the United States is more conspicuous in the oil import trade 
of other countries than Great Britain. Thus China gets 83 to 93 percent 
of her illuminating oil from this country; Canada, during the fiscal year 
ended March 31, 1924, got practically 100 percent of her gasoline imports 
and 70 percent of all petroleum imports from the United States; and in 
1923, Germany obtained from us 72 percent of all her incoming mineral oil. 

Gasoline, Naptha and Other Light Products. Of these exports France 
and the United Kingdom almost equally divided 52.8 percent in 1922 and 
55.6 percent in 1923, referring to the total quantity. Canada, Italy, Aus- 
tralia, Belgium and Argentina brought the takings up to 73.2 and 177.6 
percent respectively. for these two years. The percentages according to 
value were slightly less—France, the United Kingdom, Australia and 


* See U. S. Commerce Reports, May 19, May 26, and July 7, 1924; “‘Expect Larger 
European Oil Demand,” by L. M. Fanning in The Oil and Gas Journal, August 28, 1924. 
New developments abroad naturally bears upon the export business of the United States. 
See U. S. Commerce Reports, January 28, 1924; “A Review of Petroleum Development 
Abroad in 1923,’ by Homer Fox, then acting chief, Petroleum Division; also, by the same 
authority, ‘‘World Trade in Gasoline,” July, 1925; sold by the Supt. of Documents, Washing- 
ton, D. C., at 15 cents. 


OILDOM: ITS TREASURES AND TRAGEDIES 185 


EXPORT DISTRIBUTION CHART 


FOREIGN COMMERCE DEPARTMENT, CHAMBER OF COMMERCE OF THE UNITED STATES 


EACH| @ REPRESENTS $100,000 


TOTAL FXPOR"G, 1924: $26,495,001 


Ll. La Ca wr g a Ca [4 Ca 
ae 
eens Suk h on. 
Age CY eB P 4 
~ Mes " 3 
: : GDOW 
| te goR8 ies "f : 
> 7] 
2 VA 
oe S| Sp ae 
a Saearan an ay feds ee | ae i : 
34 CUATEMABA . tt. ~ : - PHILIPPS 
ig SOF SALVADOR® a lo | 2 gh : lout See: 
! ~ sean cpsTa RIGke NyGiap ase i 
7 CHILECSp _)< / Meee AICK 
PARAFFIN ufo, wee ie, 
Ea WAX CALS YR, 1924 
EACH| © REPRESENTS $100,000 
rorat FXPORTS, 1924: $18,525, 10 
Ce = 
cor ar oa is 7 2 ~ wo or ier iA oa 


Canada acquiring together 61.6 percent in 1922 and 64.7 percent in 1923. 
Illuminating Oil. China averaged 17.4 percent of the quantity and 22.2 


186 OILDOM: ITS TREASURES AND TRAGEDIES 


percent of the value of our exports of kerosene in 1922 and 1923. Second 
came the United Kingdom with percentages of 14.8 and practically 10, 
respectively, of the quantity and the value. The three next best customers 
for American kerosene were France, Netherlands and British India. 

Lubricating Oil. Naturally, the industrially developed nations of Europe 
need lubrication for their machinery, whether on land or sea. Exclusive 
of the lubricating greases, in 1923 the United Kingdom took 25 percent, 
France 15.8, Germany 6.6, Italy 5.7, and Belgium 5.1 percent of our ex- 
ports. Japan and Australia ranked respectively 6th and 7th in importing 
anti-friction oil from the United States. In 1922 Germany had taken 12.5 
percent compared with 17.2 percent for France and 22 percent for the 
United Kingdom. . 

Gas and Fuel Oil. In harmony with her growing imports of crude oil 
for home refining, the United Kingdom took only 15.4 percent of these 
heavy oil exports from the United States in 1923 compared with 25 percent 
in 1922. Panama, undoubtedly on account of the bunker demand, led the 
other importers in 1923. Canada was a close third with 12.2 percent in 
1923 and 15 percent in 1922. Chili, Mexico (West Coast), Italy, Japan, 
Germany, France and Argentina bought from 2.6 down to 1.8 million dollars 
worth of American gas and fuel oil in 1928. 

Unrefined Oil. Canada, for a long time, has been our best buyer of crude 
oil, absorbing 56 percent of our export surplus in 1923 and 76 percent in 
1922. Mexico suddenly increased her takings from next to nothing in 1922 
to 36 percent in 1923. They consisted of California light crude to replace 
her losses in refinable oil for her domestic stills. Argentina took a trifle 
over 4 percent—about $1,000,000 worth—or twelve times as much as in 
1922. Cuba cut down her imports of our crude from $2,343,000 in 1922 to 
$855,000 in 1923. 


LEADING EXPORTS OF LIQUID PETROLEUM FROM THE UNITED STATES IN 1923 
ACCORDING TO IMPORTANT DESTINATIONS (Values in Millions of Dollars) 


. Crude Gas and Lubricat- Illuminat- Gasoline, Total of 
Receiving country oil fuel oil ing oil ing oil etc. all oils 
United? Kingdom. .sis0... nine a eeaa $5.5 $17.6 $ 5.9 $35.6 $64.6 
BIPANCer ae wai ene Gite ee ee ee eos ieee 1.4 11.8 D2 82.0 50.4 
Canada: 25 co cae ca ee ee $13.0 4.4 2.5 25 (ee Dar (ars 
Gina se Bese Meena oon Sears 8 1.4 17.0 6 19.8 
Adistialia avec ercc eae aes toate 8.2 8.6 9.0 15.8 
AVGED EI Tan (ho seine ome a ets 1.0 13 2.6 22, 6.8 13.9 
Det atly gi cue ie lap eae ee ss bana amece oem nets 1.8 4.4 1.6 5.3 13.1 
German yaoi eee ae fe 1.5 Bel 1.5 Zee i by ea b 
Bel oi Ae eee some aes ce eee 4 3.9 1.6 5.0 10.9 
Paani eevee Neues Cortiad ee cea eee nee 5 1.6 se Onl 1.9 10.4 
Bra Zils ee eee Oe veal ee winnaar haat recites OTe i) 1.9 3.5 3.7 9.3 
IMeXi CO: pees iain tera eke viene 4.7 Pau 8 iss ee! 5 8.1 
INetherlands/ 235 iu) tices natin) eMpyats a 8 29 3.3 1.6 6:6 
British shu Gise eye caer ae ae 2.6 3.8 er, 6.4 
British? Afriea“Southin. see. ee Seite 1 2.6 2.6 6.4 
PANNA. c ope con se laconic teedlovels i aneae 4.9 Sian eat .6 5.5 
INGw 7 ZeAlaI yo sess sieves ia etenane aes eae ah AS) 4.0 5.2 
Swedenycnc.iua ye rachs ra peet Cc acceie Hoe 4 10 1.0 2.8 5.2 
Meni s Wey oe areca aaa ne comin ee tie feels a) 1.0 1:2 ay 4.8 
Spal wie ites oats hey aban Ste Peng 1.7 Aer DET 4,4 
Bhilip pinesssacatiee ac ee pees ; 8 6 1.6 132 4.2 


Compiled by the author from data published by the Department of Commerce. 
Relation of Exports to. Domestic Production. In 1923 and 1924 our ex-. 
ports bore about the same ratio to our production that our imports bore to 
our consumption considering the quantity of crude oil. (See page...) The 
actual exports were 94.9 (and 111.8) million barrels and the production, 
733.3 (718) millions*; the imports 99.5 (and 94.5) millions and the domestic 


* Including amount produced for consumption on leases and not entering trade channels. 


OILDOM: ITS TREASURES AND TRAGEDIES 187 


consumption 588 (and 612.3) million barrels.t The exports therefore made 
12.8 percent (and 15.5) of our total domestic yield of crude oil. In detail 
the percentages of refined exports were of the refined products as follows: 
Gasoline, 9.6 in 1922, 11.5 in 19238, and 13.6 in 1924; kerosene, 39.8 in 1922, 
36.3 in 1928, and 36.4 in 1924; lubricating oil, 34.1 in 1922, 31.7 in 1928, 
and 33.0 in 1924; gas and fuel oil, 7.2 in 1922, 11.6 in 1928, and 11.7 in 1924. 


Exportation Not Necessarily Depletion of the Natural Resource. The 
impression prevails in some quarters that we are robbing our nation of its 
natural resources in order to increase our huge and superfluous reserves in 
gold (over $4,500,00,000 on September 1, 1924). From one viewpoint, this 
is not true in regard to petroleum which, admittedly, is one of the two 
most evanescent of our natural resources. During the past 10 years we 
have actually imported more mineral oil than we have exported, measured 
in quantity. Even in 1928, the year of our greatest overproduction, our 
imports of both crude and refined oil exceeded the exports by almost 
5,000,000 barrels. (See “Recent Expansion in Export Trade,” page 181.) 


—The Texaco Star. 


EXPORTS SCATTERED EVERYWHERE; SCANDINAVIA GETS HER SHARE 


Station of Wahlunds Mineralolje Aktiebolag, at Stockholm. The Texas Company’s splended financial 
record is partly the result of the successful operation of its highly organized foreign sales department. 
The American share in the Scandinavian oil market continues to form about 85 percent of the total con- 
sumption in the three countries. (See U. S. Commerce Reports, March, 1926.) 


PETROLEUM TRADE OF THE UNITED KINGDOM IN 1924* 


The magnitude of Great Britain’s petroleum trade, and its dependence 
upon foreign sources of supply, are apparent from the fact that it paid out 
more than $185,000,000 for mineral oil and its products during 1924. The 
quantity imported approximated 1,800 million gallons (American measure) 
or 42 million barrels.. The exports in 1924 exceeded 125,000,000 gallons or 
3,000,000 barrels valued at more than $14,000,000 dollars. The re-exports 
amount to less than 70,000,000 gallons or hardly 12/3 million barrels of 
the declared value of 12 2/3 million dollars. The increase in imports since 
1921 was about 83 percent (see page 17). 


+ Exclusive of 87.6 million barrels of bunker oil laden on vessels engaged in foreign 
trade. In calculating the percentages of the exports the shipments to insular possessions 
are included. The source of data is a bulletin of April 3, 1925, issued by the American 
Petroleum Institute, in turn based upon Government statistics. 

* Almost entirely abstracted from Commerce Reports of January, 1925 (U. S. Consul 
C. L. DeVault of London). 


188 OILDOM: ITS TREASURES AND TRAGEDIES 


Crude Oil Imports. These totaled 12% million barrels for the 12-month 
period, a gain of over 30 percent in one year or more than 100 percent in 
two years. Most of the huge increase came from Persia, which in October 
1924, supplied over 37.1 million gallons compared with 11.3 million gallons 
from Curacao (Venezuela), 6 millions from Texas ports, and small ship- 
ments from New York City. The imports of crude oil have grown 
enormously since the establishment of the large Anglo-Persian refineries 
at Llandarcy, Wales, and at Grangemouth, Scotland. Consequently, there 
has come a drop in the receipts of foreign refined products with but two 
exceptions.* 


Increase in Imports of Gasoline. The multiplying of motor-driven 
vehicles has upheld the growth in gasoline imports. The increase over 
1923 amounted to more than 115 million gallons. The imports during 
October, 1924, were at the annual rate of almost 500 million gallons or 
12% million barrels. This rate would allow nearly 390 gallons to each 
vehicle registered in use as of August 31, 1924. On that date the motor- 
driven vehicles numbered 1,266,416, of which 495,579 were motor cycles. 
There were 160,000 more gasoline-propelled vehicles than a year before. 


Growing Use of Fuel Oil. More than 11 million barrels of fuel oil were 
shipped into Great Britain during 1924, being a small increase in one year 
but a slight decrease in 2 years. Evidently the refineries cannot yet satisfy 
the increasing consumption not only in commercial and naval vessels but 
also in locomotives and industrial plants. During the 12 months ended 
‘July 1, 1924, 45 vessels of 242,162 tons—27 percent of the tonnage of new 
vessels—were fitted for oil burners. The total tonnage recorded on July 1 
as oil burning was 17,154,072 in 1924, 15,792,418 in 1923, 9,359,834 in 1920 
and 1,310,209 in 1914. Many large office and business buildings in London 
have lately installed plants for heating with oil. 


British Coal Has Found Oil a Sharp Competitor. The shifting to oil 
bunkering is one cause of the British coal crisis, coal exports for bunkering 
in the North Sea, the Atlantic and the Mediterranean have fallen from 
73,000,000 tons in 1913 to 45,000,000 at present. No wonder, since coal 
burning vessels now constitute but 64.8 percent of the world’s tonnage 
compared with 88.4 percent in 1914, according to the London Bureau of 
The Wall Street Journal. 


Less Buying Abroad of Gas, Illuminating, and Lubricating Oils. Kero- 
sene receipts were off about 12 percent compared with 1923 and 25 percent 
compared with 1922. Lubricating oil on a large scale continues to come 
from the United States which is likewise the chief source of kerosene and 
gasoline. However, lubricants of all kinds are being produced on a large 
scale in the island kingdom. Gas oil imports fell off during the last part of 
1924 compared with the corresponding periods of 1923 and 1922. 


— 


*According to Acting U. S. Com’l Attaché M. M. Mitchell, London. For complete figures 
for 1925 see Petroleum Times of London, quoted in The Oil & Gas Jnl., Feb. 18, 1926, and 
U. S. Commerce Reports, March 8, 1926. Total British imports of 1,606.9 million imperial 
gallons in 1925 exceeded those in 1924 by 8 percent. The growth in the importation of crude 
oil (48 percent of which came from Persia and 20 percent from Venezuela) at the expense 
of refined products induced a drop in total value from 41.4 million pounds sterling in 1924 
to 39.5 million in 1925. Receipts from the United States were 13 percent smaller in 1925. : 


OILDOM: ITS TREASURES AND TRAGEDIES 189 


BRITISH PETROLEUM TRADE IN 1925 * 

Importance to the United States. The United Kingdom has long been 
our largest single market abroad (see preceding table of foreign cus- 
tomers). The trend of British trade is, therefore, of particular interest 
to American petroleum exporters. Of our mineral oil exported during 
1925, the United Kingdom took of the gasoline, 28 percent; paraffin wax, 
2 Tpercent; lubricating oils, 22 percent; fuel and gas oils, over 12 percent; 
kerosene, over 12 percent. In point of value British receipts of American 
petroleum approximates 80 to 90 million dollars or one-fifth of all our 
oil shipments to foreign lands. Rather disconcerting is the discovery that 
both the total imports of refined oil and our share therein dropped off 
during the period 1924-1925. 

Lessening Significance of the United States as a Source. Imports from 
the United States decreased 13 percent and the American share in the in- 
dividual products from non-British sources declined except in fuel oil, as 
follows: Kerosene (lamp oil), from 80 percent in 1924 to 58 percent in 
1925; gas oil, from 93 percent to 80 percent; gasoline (motor spirit), from 
76 percent to 47 percent; lubricating oil, from 86 percent to 85 percent; 
and crude oil, 1.6 percent in 1924 to even less in 1925. Apparently fuel 
oil fell off absolutely at least 100,000 barrels, although the Commerce De- 
partment reported a relative increase from 15.3 percent in 1924 to either 
17 or 24 percent in 1925. Our sales to the United Kingdom were in the 
ascendency as a whole up to 1924 when the refineries at Swansea, Shell- 
haven and Grangemouth got into good swing. With growing receipts of 
crude oil from British owned wells in Persia and Venezuela (via Curacao 
in the Dutch West Indies), American exporters of refined products. are 
now facing a steady reduction in sales to this island kingdom. | 

Value and Variety of All Oil Imports. Due to this recent drift in the 
“complexion” of the imports from “blonde” products to “brunette” crudes, 
the total value fell about 3.5 percent in 1925 from almost $200,000,000 in 
1924, notwithstanding the steady upward trend in total receipts, which 
were, roughly, 46 million barrels (of 42 American gallons) in 1925, com- 
pared with 45 millions in 1924, 38 millions in 1923 and 34.5 millions in 1922. 
Arranged in the quantitative order for 1925 the British imports of liquid 
forms of mineral oil were as follows, in millions of American gallons: 


Product PELoves ose 1902p, Product 1923 1924 1925 
SPU CER OLLI tote akcuerane bees 402 557 674 Lubricatine oil.a.c... « 99 122 103 
GABOIITIO UE hss! ete eae ace 393 507 486 GOS AOU cote alts wee cera 85 81 87 
NUK adh , Pond bee Wee kc) ba aia OR ce 436 463 401 Other refined oils.... 8 5.2 7.5 
IREEOSENIC mine: trs.c'eis sense eee 173 150 170 All refined oils....... 1,189 1,328 1,254 


Import Origins Other than the United States. While American ship- 
ments have generally made up more than half the British imports in value, 
in volume they have made less than half because of the insignificant con- 
tribution of crude oil. Other sources of imports are important only in 
single products or two as a rule. Thus Persia supplied of the crude 96.5 
percent in 1923 and 82.7 percent in 1924; Mexico, 76.7 percent of the fuel 
oil in 1923 and 72 percent in 1924; Dutch Borneo, 16.6 percent of the 
gasoline in 1923 and 11.6 percent in 1924; Russia, displacing Mexico as the 
second source of kerosene, supplied 8 percent in 1925; but Mexico is still 
second in lubricating oil, furnishing 6 percent in 1925 to 5 percent from 
Russia. 


* Abstracted from Trade Information Bulletin No. 407, U. S. Department of Commerce, 
Bureau of Foreign and Domestic Commerce, Julius Klein, Director, April, 1926, 


190 OILDOM: ITS TREASURES AND TRAGEDIES 


Export Trade in Petroleum Products. With the operation of British re- 
fineries exports of products have risen at a higher rate than the imports 
of crude. The former increased about 120 percent from 90 million Amer- 
ican gallons in 1923 to 200 millions in 1925; the latter, almost 70 percent 
from 400 million American gallons in 1923 to nearly 675 millions in 1925. 
The principal export was fuel oil with 101 million gallons in 1925. Second 
in quantity was gasoline with 61.5 millions; and third, kerosene, with nearly 
25 miilion gallons. In addition to the exports of British refined products, 
about 75 million gallons of the imports were reexported, gasoline consti- 
tuting the biggest item or 78 percent of the total. 


—The Texaco Star. 


BRITISH SALES STAFF OF AN AMERICAN OIL COMPANY IN SOUTH AFRICA 
The silver cup was likely won in a cricket match. 


WORLD CONSUMPTION FOR 1923* 


Great Britain Second Greatest Consumer. The total consumption of 
petroleum and petroleum products throughout the world during 1923 
amounted to over 88 billion gallons or 905 million barrels of 42 U. S. gal- 
lons. Of this, our country consumed 25 billion gallons or practically 600 
million barrels. This made 66 percent of the world figure; but by adding 
the 1% billion gallons of bunker oil shipped at United States ports for the 
use of vessels engaged in the foreign trade, the total became 70.2 percent. 
The next largest users were Great Britain and Russia, followed, in order, by 
Canada, France, Mexico, British India and Argentina. The consumption in 
these seven countries ranged from 3.9 percent in Great Britain down to 1.2 
percent in Argentina. 

Inventory Changes Ignored. In reaching these estimates, domestic pro- 
duction plus imports minus exports has been taken to indicate consumption. 
No account of changes in stocks have been taken except in the figures for 


\ 


OILDOM: ITS TREASURES AND TRAGEDIES 191 


the United States, Mexico, and Rumania, since accurate inventories are 
not available for most countries. Where official statistics for 1923 were 
unobtainable, unofficial figures from the most reliable sources at hand were 
consulted. Conversions were made to American gallons for comparative 
purposes and crude production statistics added to show the relation between 
production and consumption in the various countries. 


Domestic Production and Exportation. Only four out of the 16 largest 
consumers outside of the United States, namely, Russia, Mexico, Rumania 
and the Dutch East Indies, produce enough oil to meet local demands and 
leave a surplus for export; while only three of the remaining 12 have 
sufficient output to fill any important part of domestic requirements. These 
three are Argentina, Japan, and India. The United States had an excess 
of production over consumption in 1923, but the increase in stocks nearly 
absorbed this excess. The noteworthy result was that almost the entire 
export trade and bunker oil supplied to vessels in foreign trade was pro- 
vided by imports. American refineries supplied the rest of the world with 
more than 3 billion gallons (practically 75 million barrels) of petroleum 
products in addition to crude shipments to make a total of 4 billion gallons 
(95 million barrels), or 30.8 percent of the estimated total consumption 
outside of our country. In other words, the Old World except as noted, 
Canada, and much of South America would suffer serious want were it not 
for the intensive development of the oil resources in the two major re- 
publics of North America. (See map on page 18.)* 


ESTIMATED WORLD CONSUMPTION OF PETROLEUM AND PRODUCTS IN 1923} 


Population, Millions of gallons Consumption 
Geographic division millions - Production Consumption per capita 
GM teG eR INP OGIN a: cates. ste cieie se aa aise eae 47.3 satan 1,486 31.4 
RUSH eee ee tein en oe ares aieke ee sate eine e 93.4 1,603 1,153 12.3 
Dominionwote Canada s.as ces. cee iasers 8.8 is 715 81.5 
VERT Cert terrueeoe hotel a cbc RSIS 6 oe aie ite aire 39.4 or 480 122 
MEXICO Oar hoa ores sigs te minerals 15.5 6,278 476 30.7 
BEISISU EI NOIS Paces cilities, cats cicla we le rarele' 319.1 318 A471 1:5 
PAS EMEA wie emtde siercter cial cue rece a ctory oIMth sale 9.0 LST 418 46.4 
BERTI ET Go Pelee Os vo lcs Gv 8 al Paehhile «Bas 17.4 456 377 16.0 
Republic of Cuba .......--.ceeeeveees 2.9 0° 275 95.1 
Dutch Masts Na1es) signs Siecle eineie 4 Ses 50.0 630 260 5.2 
Renublic Of China eis. ets aj. wlohe so 8 eee 302.0 0 253 8 
Ta rere eee ich ee ee ole oF areca a eeeleia nas 3.8 0 217 57.7 
INietherig muse a ctce sie ciclc aera ls oi g'e-s oud sie 6.8 0 183 26.8 
Titer lye a ere tase ialitcties icolis yatta 6 ea aie) 0 eliassgrs 37.5 1 175 4.7 
GER HIA IVE rete erties Vins alae mn el ws ie olan t inks 39.9 15 167 2.8 
Japan and Formosa .....++.+++++se8- 60.6 71 166 2.7 
South America, unspecified .......... 17.9 290 113 6.3 
PR sel are rae eS Ra PS eels © sige'ere 30.6 0 109 3.6 
Pols te catende ha i oleae sles e'le-ereie arana's 27.8 210 106 3.8 
1 pe ee ee reg oe ie SS 12.7 44 95 1.5 
Philippines .......-seeeeeccreeeeeeece 10.4 0 83 8.0 
Belgium and Luxemburg .....+.-++++- aot 0 78 10.7 
aE T ELLTSh cvatere te (oe Sees pieiers eon 608 arava leis aie eve 5.4 0 50 9,2 
Mia Ptew coin toss ee ae eee a 20.8 0 49 2.4 
Union of South Africa ......-.++-+--- 6.9 0 38 5.5 
New Zealand 9. cs sc. ve oceans oe vl oes 1.2 0 25 20.3 
Central America .....---seeseeeeeees 5.8 0 15 2.6 
Venezuela .cvcsccsccr cece set cmenens 2.4 160 18 7.5 


* Adapted from Commerce Reports, September 8, 1924, H. S. Fox, petroleum specialist. 


+ Both the absolute and relative amount of refinable Mexican mineral oil have been 
decreasing, so that the United States may be regarded as generous to the importers of 
her refined oils since these products have been replaced with inferior crudes from across 
the Rio Grande. The percentage of American petroleum which fills the wants of foreign 
lands becomes 35 instead of 30. 8 if the one and one-half billion gallons of bunker oil for 
ships in foreign trade be excluded from the total consumed outside of the United States. 


192 


OILDOM: ITS TREASURES AND TRAGEDIES 


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OILDOM: ITS TREASURES AND TRAGEDIES 193 


CHAPTER X—LATIN AMERICA, LATENT AND PRODUCING 
INDUSTRIAL POSITION OF THE LATIN REPUBLICS 


Leadership in Many Lines. Many North Americans erroneously look 
upon Latin America as a group of mere manyana lands. ’Tis true that the 
natural resources of this large region—17.5 percent of the earth’s land 
area—are largely latent; and yet, the hundred million inhabitants—5.5 
percent of the earth’s total—appear to be quite happy and contented. Per- 
haps they plan to leave a little pioneering for posterity. Several causes 
have encouraged moderation in the rate of development — the tropical 
climate, the density of vegetation in humid parts, various other drawbacks 
to exploration, a small mileage of railways and of good highways, a scarcity 
of certain skilled labor and technical talent, and last- but not least, the 
erratic treatment accorded foreign capital in some of these countries. 
Nevertheless, it is astonishing to stop and consider the long list of com- 
modities treasured in international trade for which Europe, Canada and 
the United States depend upon Latin America as an important or even 
exclusive source of supply. Thus Cuba leads the world in sugar; Mexico, 
in silver; Central America, in bananas; Brazil, in coffee and black diamonds; 
Argentina, in quebracho, a tanning material, and Chili, in sodium nitrate. 
Practically all of the’ world’s wild rubber is now obtained from Latin 
America. South America stands next to the United States in copper and 
next to the Straits Settlements in tin. 


Ofttold Tales of Treasures and Tragedies. History and romance recount 
fascinating stories about the fabulous wealth of the Incas of Peru and the 
Aztecs of Mexico.j The cruel conquests by the Spaniards, however de- 
plorable, opened up the treasure vaults of the vanquished which eventually 
led to the development of soil and oil by the overcrowded Europeans and 
their North American descendants. The Spaniards, however, overlooked 
the more useful minerals in their persistent search for gold, silver, and 
precious stones. It is startling to realize how the world’s stocks of one 
metal—silver—have emanated largely from Latin America during the past 
four centuries. About 50 percent is even now coming from Mexico alone 
besides minor quantities from Bolivia, Peru and Chili. In contrast it may 
be noted that the world’s gold has been accumulated mainly during the 
past three-fourths of a century in and from English-speaking lands, and 
then particularly from South Africa during the 20th century. World 
sources of the red metal, remarkable to relate, are now, more than in the 
past, traceable to the two Americas, home of the copper-skins—90 percent 
in 1924, 


Glory of Panama, Gateway For Gold in Days of Old.* Balboa’s great 
discovery opened the way for the flow of wealth to Spain. In 1519 Panama, 
“The Place of Fish,” was built on the Pacific coast. It was the first city 
founded by Europeans on the American continent. Here came great 
galleons, laden with gold and silver from the countries to the south. They 


* While Chili and Peru produced together almost 15 percent of the world’s copper, 
Latin America (including Mexico) as a whole is yielding as much of the red metal as 
Africa, Europe, Asia and Australia together. 

j The reader is referred to Prescott’s well-known histories. 


194 OILDOM: ITS TREASURES AND TRAGEDIES 


U.._S. BATTLESHIP 
TRAVERSING 
PANAMA CANAL 


Not until this waterway 
had been open for eight 
years did the ‘volume of 
petroleum traffic become 
noticeable. In 1922 Cali- 
fornia crude began to move 
to the Atlantic seaboard. 
During the fiscal year ended 
June 30, 1924, all forms of 
mineral oil made almost 51 
percent of the 19,000,000 
tons of eastbound cargoes. 


were the precursors of the clipper-saile which carried gold and goods from 
California in the fifties and sixties of last century, and of the petroleum 
tankers loaded with liquid gold from later Goleondas. Over 250 years ago 
this second strongest citadel in Spanish-America was spoliated by the 
boldest buccaneer of the seas, the Welshman, Henry Morgan. Only a 
few arches and a broken tower now mark the overgrown site of the older 
Panama. The revolt of colonies over a hundred years ago and the Cali- 
fornia gold discovery by Marshall in 1848 resulted in the rebuilding and 
rejuvenation of Panama. In 1855 a railroad was completed across the 
isthmus—for a time the most profitable of all steam lines. Although the 
earliest settlers saw the eventual necessity of digging a ditch between 
the oceans the physical difficulties were too great for its attempt until 
modern machinery could be invented. It was the malarial condition rather 
than the financial troubles that prevented the French builder of the Suez 
Canal from accomplishing what General Goethals did with the help of 
General Gorgas. This famous sanitarian successfully fought the mos- 
quito—and his main ammunition was mineral oil. When the Panama 
Canal was opened on August 15, 1914, nobody dreamt that eight or nine 
years later the leading toll-payer would be petroleum!* 


United States Enterprise in Latin America.t Prior to the war, Europe 
led in the economic life, particularly in South America. Our American 
bankers and traders gained during the period 1914-1918. They met a tem- 
porary setback after the Armistice when every weapon of commerce was 
employed against them. Credit for a large share of our present success 
in overcoming European competition is due to the judicious investment of 
American capital and to the pioneer work of American engineers. How- 
ever, long before the United States was able to export capital, its citizens 
were applying skill and ingenuity in building railways, establishing steam- 


* See E. C. Brooks’ ‘‘Stories of South America,’’ Johnson Publishing Co., Richmond, 1922, 
See also Roger W. Babson’s ‘‘The Future of South America,”’ particularly pages 239-249, for 
unfavorable treatment of American capital. 

{ Abstract of address by Julius Klein, U. S. Dept. of Commerce. 


OILDOM: ITS TREASURES AND TRAGEDIES 195 


ship lines, and opening coal and metal mines in South America. Thus, 
72 years ago, Wm. Wheelwright, of Newburyport, Mass., planned the first 
railway and subsequently projected the first trans-Andean railroad. He 
established the first steamship line on the west coast of South America. 
Twenty years later Henry Meiggs performed the tremendous feat of con- 
structing the highest standard-gauge railway in the world, the marvelous 
Central Railroad of Peru. The Panama Canal is the outstanding achieve- 
ment of American engineering enterprise. There are other striking proofs 
of our ability and our interest in the development of the resources of Latin 
America such as its deposits of copper, iron, silver, tin and petroleum. 

Only Three Share Well in‘World Trade. Since Latin America as a whole 
has poorly developed power resources (page 204), manufacturing has not 
advanced there as far as in those foreign countries that have applied their 
available energy in the form of either solid fuel or “white” coal. For this 
reason no nation south of the Rio Grande, with only two notable exceptions, 
rank high in both total world trade and in per capita commerce. These 
two, Argentina and Cuba, are agricultural countries which invariably have 
a huge surplus of certain products for export. Their mass production of 
these is related to their large imports of mineral fuel, particularly 
petroleum of which Argentina also obtains a considerable quantity at home. 
Brazil, which likewise ranks among the first twenty nations in the world 
trade, has only 1/7 the per capita commerce of Argentina and only 1/9 
that of Cuba. This is owing to her large population (now nearly 32,000,000) 
and to her backward state of industrial development.* 


FOREIGN COMMERCE OF LEADING COUNTRIES IN 1924 (Millions of Dollars) 


United Kingdom ...... O[S00R LOLA Us ae tic stere oizia'sle 155405" Denmarle a. s.yie. cto ooo 755 
United States ........ 8,200 Malyeredesmacdsecs Beare 4 1 Oman EST ELZIb here oYoleve ws acre tne Putty e455 
WPM VICEe cite seis ceili! cleicic 4,275 Belgie ee cise cis ators MAGS A UStiriay ss acne ticle eis. aie 725 
Germany ....... Fen 8,730 Argentina ..c.cccocce TEAAD Te Cuba. viele cs Suheclecinlds 710 
British laniaye sc cice + ae 1000S AUStrslia Fs. 2ste cieics siete e D250 opis weden Niws-s...0 2 delete aete 707 
Canada rr. acts code s'es - 1,850 Czechoslovakia ....... 970 China or Russia ...... fh us 
DADAM tease o Helos Sasa’ 1,750 Switzerland 2 .es cesses 815 


UNITED STATES TRADE WITH LATIN AMERICA 


Position in Our Foreign Commerce. During 1924 all Latin America im- 
proved her position by commanding 22.2 percent of our entire foreign 
trade compared with 21.9 percent in 1923 and with 43.3 percent retained by 
Europe. Of our total imports of 3,610 million dollars in 1924, 29.4 percent 
came from the region to the south; of 3,793 millions in 19238, 27.8 percent 
came therefrom. In 1924, entire Europe supplied only 1 percent more than 
Latin America of our buying abroad; all Asia 3.6 percent less. As in our 


*From “International Trade in 1924,” U. S. Commerce Reports, June 1, 1925, J. J. 
Kral, Statistician. 

All of the Latin American countries are in that stage of economic development where 
the energies of the people are chiefly devoted to the production of raw materials. A feature 
of their trade is the specialization of each region in one product and the consequent depend- 
ence of their prosperity upon foreign markets. Notable examples are wheat, wool and hides 
in the River Plate country; coffee in southern Brazil and the Caribbean region; wild rubber 
in the Amazon valley; cacao in Ecuador; Chili saltpeter in the Atacama desert; petroleum 
in Trinidad and northeastern Mexico; and bananas and coffee in Centrl America and 
the West Indies except Cuba.—U. S. Commerce Reports, Supplement 9, 1921. 

{ For more painful details see “Our World Trade in 1924,” by C. D. Snow, For. Com. 
Dept. of the Chamber of Commerce of the United States; also “United States Trade with 
Latin America in 1924,” by J. R. McKey, U. S. Dept. of Com. (10 cents, Supt. of Docu- 
mer.ts, Washington, D. C.) 


196 OILDOM: ITS TREASURES AND TRAGEDIES 


petroleum trade with Latin America so our total exports thereto make a 
value much less than our imports therefrom. These were 770 million dol- 
lars against 1,060 millions, leaving a debit balance on our national ledger. 
Our exports to the south were 16.8 percent of all our 4,591 million dollars 
exports in 1924; 16.6 percent of 4,167 millions in 1923. Europe took 53 
percent of our external sales in 1924, Asia 11.2 percent; in 1923, respec- 
tively 50.2 percent and 12.3 percent. 

How the Separate Nations Stand. Some of the southern countries show 
up well in comparison with old world powers that deal with us, as indi- 
cated below. The figures refer to percentages of our export and import 
totals. 


Our Fifteen Best Customers, 1924 Chief Sources of Supply ; 

1 Great: Britain: siccices aor sii seieieienst ZL 1 Canada oie 0s ie os obec, 00 cisternae 11.1 
2 i Ganada stad Jue coke dete cane eerste 13.6 2 Cuba (sugar 87%)*' 0... cesar 10 
SU \GerMany | Zaiaieie tie cecal dusrs aborecaterereteteveiecs 9.6 3 tS ADAM iis oc, 5. snide p buele Suakenop Seenecee Mer eanES 9.4 
4 eee aN ede Ble aker eters karenereeetemeia arotesanetote 6.1 4 Great) Britain. -<.,...(.c4- cose eee 9.3 
BSA AM ae sscve bla sit el ater gieveksin orere cnatezevelererers 5.5 5 Brazil (coffee 88 %)......eccsrcees 5 
6 Gaba: (cotton cloth 6.8%) ......... 4.4 6 Mexico (crude oil 54.5%).......... 4.6 
PATA YNSE Sie ecw arerelavc: seer olohsteveisieae aces cians) re 4.1 7% Straits, Settlements <2)\-(ciessrectelete urs 4.1 
Se olan Gi’ os ransce eis s etevose sie ie-eoeuste stencvstevers 3.3 8. France © .:.:6,0.s%0's 0s eieis « ticle be easieperceammees 4.1 
9 Mexico (refined oil 6.7%) ......... 2.9 9. Germany ve. ois e/lo nie ocsue ee ronene eee 3.9 
LO AmStraliaiey oh ctetosecclare woenitesiorets eens 20° 10> ‘China sis Soc sa sic steusicmiate te een 3.3 
11 Argentina (farm machinery 14.4%) 2.5°.: 11> British’ India. *. 3. on. oe ee eee 2.9 
LA) SBeleium Favalcses teats e sere aoe caetee aiorette 2.5 12 Chili (sodium nitrate 48%) tiers ates 2.1 
US OnChin a 7. %0. screws veresens sia re ote avekevepenoloierevslerciers 2.4 13° Philippines} ..0.3.:0ji2'ca ere Sees 2.7 
LAPS PAIN re vse alee wale oicle ersle eMac era tears 16 14 Argentina (flaxseed 32%) ......... 21 
15 Brazil (refined oil 19%) ........... TA. 2 16> Ataly | secGie es oieiekio bist c ere kee eee 2.1 


We Buy More Than We Sell. From European nations we usually buy 
only half to one-third as much as we sell to them; but the reverse is true 
of Latin American countries. Thus Chili’s exports of nearly 99 million 
dollars to the United States were actually more than 8 times as great as 
her purchases therefrom; those of Brazil, 234 times as much as her imports; 
Cuba’s, 14/5 times; Mexico’s, 14% times, and Colombia’s, twice as much. 
Argentina, on the other hand, raising farm and range products of the tem- 
perate zone similar to our own, supplied us with goods worth only five- 
eighths as much as those received from us. It is therefore not surprising to 
note, in the second table above, that three Latin American nations were 
among the first six of our chief sources of supply. It is an astonishing 
statement, but true nevertheless, that all Latin,America in 1924 bought 
barely five-sixths as much of us as Great Britain did—notwithstanding 
a ratio of 5 to 2 in total population. The contrasts in this triangular trade 
would be intensified if the United States were to refine all the crude oil to 
be shipped in the future from South America and were to dispose of the 
products to European customers. 

Notable Changes in Our Trade. Latin American commerce with the 
United States in 1925 increased 5 percent to 1,920 million dollars or 2.4 
times its value in 1914. The total exports,and imports in 1924, 1,830 mil- 
lions, was six times what it was in 1900. The nature of the trade has 
changed materially during a decade or two only in regard to great gains 
in nitrate and copper shipments from Chili, copper from Peru and crude 
oil from Mexico. Recent increased sales of wool, hides, linseed and que- 
bracho to Europe from the River Platte region permitted Argentina, 
Uruguay and Paraguay to buy more automobiles and gasoline from the 
United States. Imports from Brazil climbed in 1924 to practically 180 
million dollars, almost half as great as those from Cuba, caused by higher 
coffee prices. During last year we bought a less quantity of oil than in 
1923 from Mexico; but its higher value and the higher values of winter 


OILDOM: ITS TREASURES AND TRAGEDIES 197 


vegetables, lead, copper and silver made it possible for Mexico to purchase 
more automobiles, foodstuffs and mining machinery from us. Latin 
America (i.e., Mexico) still monopolizes exportation of mineral oil to our 
country, for all the rest of the world contributes less than 1 percent. 


—The Texaco Star. 


DISCHARGING AMERICAN CASE GOODS AT A SOUTH AMERICAN PORT 


The docks here at Rosario, Argentina, like those at Rio de Janeiro and Santos, in Brazil, boast modern 
facilities for transferring cargoes of refined oils from the United States. 


PETROLEUM AS A FACTOR IN OUR SOUTH AMERICAN TRADE? 


Advancing Value of the Oil Trade. In South America’s foreign com- 
merce petroleum played but an unimportant role before the World War. 
Since 1913 it has become a potent factor in dealing with the United States 
and Mexico. The development of both production and consumption has 
variously influenced importation. Thus Colombia has been able, since 
1922, to supply her own demands largely for petroleum products other 
than lubricants and paraffin wax. Nevertheless, our country has been 
enabled enormously to increase its sales of refined mineral oils throughout 
South America. In the largest country these now make nearly 20 percent 
of all our sales thereto, and in all South America 11 percent in 1923.t 


=_ 


* The late increase in the trade between the United States and Latin America was due 
almost entirely to enlarged imports in the form of automobiles, gasoline and oil well sup- 
plies, as well as iron and steel, from the northern republic. 

7+ M. M. Taylor in Commerce Reports, October 20, 1924; abstracted and supplemented 
by the author. 

~ According to J. R. McKey, Department of Commerce, petroleum products worth over 
$64,000,000 made 7.38 per cent of our exports to all Latin America and ranked fourth, or 
next to iron and steel, cotton manufactures and automobiles in 1925. Among our imports 
during that year, $75,400,000 worth of crude oil and $30,700,000 worth of refined petroleum 
together constituted 10.2 per cent of all our Latin American imports ranking below coffee 
(26.7 per cent) and sugar (19.5 per cent). 


198 OILDOM: ITS TREASURES AND TRAGEDIES 


Internal Trade Hitherto Trivial. Despite expansion in the production 
of Venezuela, Peru and Argentina,* the commerce in oil between South 
American countries remains relatively unimportant. Elsewhere natural 
barriers along political boundaries, i.e., transport difficulties encountered 
away from the coast, interfere with intra-national shipments. Peru pro- 
vides Brazil with little or no petroleum, sending most of the crude (which 
makes two-thirds of all her oil exports) to the United States, Canada, 
Cuba, via the Panama Canal and to Argentina, around Cape Horn; also 
four-fifths of the raw naptha to Argentina and the United States,} the rest 
going to Europe. Venezuelan oil from Lake Maracaibo has to be re-shipped 
in ocean-going vessels from a Dutch West Indian island, Curacao, where 
some of it is refined. The bar at the mouth of the Lake limits navigation 
to vessels of less than 11-foot draft. 

South American Oil Imports More Valuable Than Exports. Contrary to 
the condition of our trade in general with Latin America (page ..) and 
in petroleum with Mexico, South American oil exports are still worth 
much less:than oil imports. The reason is twofold: (1) Exportation in 
quantity has just commenced and (2) the receipts are mainly high-priced 
or refined products whereas the shipments consist chiefly of crude oil. In 
only two countries, as implied above, is the export phase more important 
than the other. The imports of all forms of petroleum from the United 
States were worth $39,000,000 in 1924 and $32,300,000 in 1923. As indi- 
cating a trend towards a better balance, the receipts in 1924 had a value 
only 10.4 times that of the shipments compared with 11 times in 1923. It 
will take a long time, however, for crude exports to equal refined imports. 


RELATION OF PETROLEUM IMPORTS TO TOTAL IMPORTS FROM THE UNITED 
STATES (Values in Millions of Dollars; Percent Petroleum of Total Imports) 


Value Percent Value Percent 
Country 1923 1924 1923 1924 Country 1923 1924 1923 1924 
Argentina .... $14.2 $13.2 12.6 11:3 |) Colombia’: 3233) $ 346 $ .67 1.9 2.3 
Braziliiccslsesls 9.5 12.6 21 19.4 Peru ica cues 74 .66 3.7 2.8 
Chiltyn veces. 3.9 7.6 12.5 24.0 Venezuela ....  .40 bl 3.3 2.9 
Uruguay. .)..)./s 2.7 3.2 18. 17.5 Rest of South 
America ... -40 46 8.7 ret) 


The three “ABC” countries and Uruguay together took 14.7 percent of 
their imports $205,000,000) in 1923 and 15.8 percent (of $232,000,000) in 
1924 in the form of petroleum products; all South America 11.8 percent of 
the imports ($270,000,000) in 1928, and 12.3 percent (of $315,000,000) in 
1924. The lower standard of living in five of the six other republics and 
in the three Guianas is reflected in the small per capita consumption made 
possible by their inconsequential imports of petroleum products. Outside 
of the “ABC” countries and Uruguay, South American imports of United 
States petroleum products made about 3 percent of the total imports in 
1928 and 1924. . 

Reliance on Latin America For Liquid Fuel. The topnotch in oil pro- 
duction has been attained by the United States. Remarkable has been our 
ability to keep output at so high a level—50 to 70 million barrels monthly— 
for so long a time (since December, 1922). It would be simply miraculous 
for our producers to maintain the flood above the 700 million mark (70 


* Argentina’s output of almost 5 million barrels in 1924 filled but 40 percent of her 
domestic demand. 

{ Return cargoes from the United States consist almost exclusively of gasoline, kerosene, 
and other refined products. 


OILDOM: ITS TREASURES AND TRAGEDIES 199 


percent of the world’s output) after the end of 1927. Admittedly the 
spurt in the spring of 1925, due to the “cloud-burst” in Arkansas, meant 
very little to American motorists since.Smackover oil is so very low in gaso- 
line. A setback of 100-million barrels in 1927 should not be surprising. 
Until our immense shale oil deposits can be developed we must depend upon 
increasing imports. Upon what foreign sources may we count? Certainly 
not on Mexico for any increase, since imports thence have dropped 75 
million barrels in four years. Can the rest of Latin America meet our 
emergency? Yes, in view of its huge resources and the present activity of 
highly organized American operators therein. 


—Texaco Star 
OFFICE STAFF OF AN AMERICAN OIL CO., AT KINGSTON, JAMAICA 


Of $23,000,000 United States exports to all British West Indies in 1925 fully 5 percent 
consisted of kerosene, gasoline, and other petroleum products including asphalt. 


Present Interdependence of Pan-American Republics. Although South 
America is not yet as populous and productive as either Europe or Asia it 
surpasses both of these grand divisions in the number and degree of com- 
modities supplied to the United States if the little of Latin America out- 
side of South America be included with the latter for statistical purposes. 
It appears from the table below (for 1923) that the exclusiveness with 
which Latin America fills our need for nondomestic crude oil is no less 
formidable than, for instance, her ability to cater to our cravings for ba- 
nanes, sugar, and coffee. Percentages for 1925 differ but littlé. 


From Latin America From Latin America 
Commodity Millions Per cent Commodity Millions Per cent 
Bananaser tic csc sess Bese we Ay; 99.9 ASP HAL Dares tka ieee $ 86.98 90.5 
DUAL EE Pmelois cs Meee O49 99.5 iW haleroiliicieietene s reree 1.90 90.0 
RICE rite © sive leone Winis 4.1 99.9 Bauxite Gress nose sacle .52 87.4 
TAN OTE taaat is Pa NRC 2.15 99.2 Flaxseed ohieca seni ete 42.00 85.9 
MINERAL OIL ........ 78. ] 98.9 Teas OFeianaca a ts, e ties 2.63 82.8 
Quebrachoweres «ccs > vielcis 4.8 98.5 Copper cae amies sae. 62.61 75.5 


COM GEN nice ee eere tie oe se LSES 97.8 MeYtilizers oo. .hhc + co bela 44,4 69.4 


* Philippine sugar considered non-foreign. 


200 OILDOM: ITS TREASURES AND TRAGEDIES 


_. In return, Uncle Sam sends to Latin America 82.8 percent of his exports 
of butter; of his exports of cement, 93.3 percent, and of sugar-mill ma- 
chinery, 79.6 percent. Of all explosives and ammunition shipped abroad, 
67.2 percent goes to Latin America; of furniture, 62.4 percent; of eggs, 61 
percent; of cotton manufactures, 58.4 percent; of agricultural machinery, 
86 percent; of oil well machinery, 41.4 percent; of aircraft, 90 percent, and 
of petroleum products, 13 percent. 


United States Imports of Crude Oil, 1924-1926. Unexpected upkeep of 
domestic production in the United States between 715 and 770 million bar- 
rels during the past four years and extensive application of the cracking 
process for gasoline manufacture have permitted a steady decline in the 
importation of petroleum, as shown in the following table wherein the 
figures represent millions of barrels of 42 United States gallons crude oil. 


Source 1924 1925 1926 Source 1924 1925 1926 
MEXICO NAS oaks catalase oN ehe ute 74 55 40 Colombia ......... oe a ate a st 2 


WenieZUel a oractearce eee eles 142 4.7 sal Pers: -CbCas aurusiaieceas orto Sloe 1.8 5 


' LMM}; SNS 


% WY, G y 


SD” 
, 


“i, 
yy 
MO, 
Ufy"4 


Z 


ARICO 


BOD 
se 


Re] Alluvials 
Se ES Llaros 
: 88 SNES Pliocene 
TR ; TM Miocene \Tertiary 
0 10 20 30 40 50 60 70 80 Focene 
Kilometers Cretaceous 


Quaternary 


GEOLOGICAL MAP OF EASTERN VENEZUELA AND TRINIDAD 


The close relationship of Trinidad to the mainland is clearly evidenced. The largest oil 
seepage in the world is Bermudez Lake, at Guanoco (see middle top of map). 


DIFFERENCES IN ECONOMIC AND GEOLOGIC CONDITIONS 


Natural Conditions Not the Same in South America. American demand 
and American enterprise cannot alone account for the fact that the United 
‘States and Mexico have been the source of two-thirds of the world’s 13,000 
million barrels of oil produced to July 1, 1925. Scientific research, discov- 
eries of new fields, and deeper drilling in the United States’ point to its 
possession of greater reserves than were estimated only two or three years 
ago (pages. 19 and 39). Eventually it may be established that North 
America originally had much more than twice as much petroleum under- 


OILDOM: ITS TREASURES AND TRAGEDIES 201 


TYPICAL MUD. 
VOLCANO OF 
EASTERN 
VENEZUELA 


This one is located 
in the state of Mon- 
agas on the _ south- 
west side of the Gulf 
of Para, opposite 
Trinidad. Seepage of 
oil is associated with 
it. Similar gaseous 
volcanos occur along 
the Caribbean coast 
of Colombia. 


ground as South America. It seems that there is more organic material in 
the sedimentary rocks here than in the region south of the Caribbean Sea 
(pages 22 and 23). One indication of this is the relative scarcity of coal in 
all Latin America. Partly offsetting this, Mexico has an immense thickness 
of organic limestone underlying its major oil fields. A greater stratigraphic 
range and wider extent of possible oil-bearing beds also characterize the 
North American continent. Nature has laid down additional unfavorable 
conditions for finding, extracting, and marketing mineral oil in South 
America. Mountain and swamp barriers interfere with transportation; the 
climate is not everywhere encouraging, especially in regard to humidity; 
and even where exudes are common the vegetation obscures the sight if not 
the smell of the oil. 

Geological Occurrence of Latin American Oil. South American and Mex- 
ican oils occur almost wholly in strata of Tertiary and Cretaceous ages 
These beds have been folded into oil-holding structures around Lake Mara- 
caibo and in Colombia, but in Peru and Ecuador they are badly broken 


\ 


CRATER OF MUD 
VOLCANO ON 
TRINIDAD 


As on the mainland 
of South America, sol- 
fataric formations are 
associated with seep- 
ages of petroleum. 


*In Northwest Peru and sSoutnwest Iitcuador the formations belong to an early Tertiary 
age. Alternating layers of clayey slute, sandstone, ete., compose the strata which rest on 
hardened sandstone of Cretaceous age. The oil-bearing beds are most tricky, being inclined, 
folded and even faulted to the extent of 1,000 feet or more —T I. Builetin No. i78, January, 
1924, U. S. Department of Commerce. 


202 OILDOM: ITS TREASURES AND TRAGEDIES 


causing many dry wells to he drilled.* In the Comodoro Rivadavia field of 
southern Argentina the first traces of oil and asphalt are found in an up- 
per Cretaceous bed of greenish and whitish sand and clay from 550 to 700 
feet thick. The thick and almost flat stratum of heavy Tertiary clay above 
accounts for the lack of surface signs nearer than points 35 to 100 miles 
away. In the main fields of Mexico, near Tampico, the outstanding fea- 
tures are: (1) A tremendous thickness of the “mother rock,” the Tama- 
sopo limestone; (2) association with volcanic necks and dikes; (3) in- 
numerable seepages similar to those of eastern and northwestern Vene- 
zuela, and (4) unique underground condition of supposed cavernous stor- 
age and known hydrostatic pressure that in places permit a single well to 
drain an entire pool without pumping. Latin American petroleum comes ~ 
from sources 200 to 3,000 feet deep, averaging less than 2,000 feet in 1925 
compared with almost 3,000 in the United States. 

Characteristics of the Crude Petroleum. The quality of the oil varies, 
but not so much as in the United States where there is a much greater 
range in depth as well as in the geological age of the oil horizons (see 
pages 26-28). The Mene Grande and Comodora Rivadavia oils of 18° and 
18.5° B. are heavier than the average from the older California fields; La 
Rosa oil is a little heavier than the average Gulf Coast product (page 39); 
Las Infantas} is reported from 27° to 36°, and El Mene, 37°, so are simi- 
lar to Mid-Continent average; Peruvian is the lightest and best, of mixed 
asphalt and paraffin base, that from Negritos and Lagunitas yielding 24 to 
30 percent: gasoline and naphtha and 25 to 34 percent kerosene with a lu- 
bricating fraction, thus comparing with the Pennsylvania grade of crude. 
The heaviest and most viscous oil is the asphaltic crude from the Panuco, 
Ebano and Topila fields of Mexico. It varies from 10° to 15° Baumé and 
is chiefly a fuel oil. 

Labor Relations Not Always Ideal. Anarchistic agitation originating 
not entirely in the United States have made Mexican workmen dissatisfied — 
with the relatively higher wage scale followed in the oil fields than in the 
rest of Mexico. Relations between employers and workers are not such as 
tend toward an increased efficiency of labor. Strikes have been frequent 
and there is considerable unrest among the labor element. Mexico is a 
country where continued development is still a factor in its prosperity, and 
undoubtedly the dampening effect of strikes and other labor disturbances 
react to lessen the flow of money available for new enterprises. The strike 
of August, 1924, was directed particularly at a Royal Dutch-Shell subsidi- 
ary (La Corona), but sympathetic strikers also forced the suspension of 
American operations near Tampico.* The strike of May-June, 1925, grew 
out of the struggle between rival unions and resulted in a number of mur- 
ders. Among those killed was the native superintendent of a pipe-line sys- 
tem owned by a subsidiary of the Pan-American Petroleum and Transport 
Co. Like the attitude of governments, labor conditions generally in Latin 
America are best at the beginning of operations in the oil fields and up to 
the time that returns come in from the investments of foreign capital. 
Future industrial peace would benefit both employes and investors and 

*R. A. Lundquist, a division chief, in the issue of May 18, 1925, U. S. Commerce 
Reports. 

{ The weighted average gravity of the’ oils produced from the Venezuelan fields (Mene 


Grande, La Rosa and El Mene) during 1924, as determined by the author, is 20.8° Baume 
or 0.5 more than the gravity of the oil from the discovery well at Smackover, Ark. 


OILDOM: ITS TREASURES AND TRAGEDIES 203 


oil sold to foreign consumers. Decent and even liberal treatment of Latin 
American labor has always been the policy of American as well as British 
management of petroleum enterprises throughout the Western Hemisphere. 
Troubles have invariably been traced to parasitic interlopers. 

Domestic Demand Limited by Road Development. The condition of the 
highways in Latin America are still a handicap to motorists. Out of 44,000 
miles of roads in use early in 1925, only 12.6 percent were classed as .good. 
About 20,000 miles were building or projected, according to U. S. Commerce 
Reports (April 6, 1925). How backward motoring must be is implied by 
the limited mileage for each of ten countries listed below. The first col- 
umn figure shows the mileage of all roads (old, building and projected); 
the second indicates the percentage which the good roads made of the total 
in use, and the third the number of gallons of petroleum consumed. 


Miles of Percent Per capita Miles of Percent Per capita 
Country roads good demand Country roads good demand 
Brazil ..... 26,500 7.8 3.6 Colombia .. 2,500 37.6 33 
Mexico .... 12,000 7.5 30.7 Bolivia ... 2,460 ala hae ? 
Chilis 7.8. 3,400 9.8 57.7 Cuhbay see. 2,100 1.33 95.1 
Perdis as900 11.6 20.? Argentina . 1,800? 40.6 46.4 
Venezuela.. 2,700 29.2 7.5 Ecuador ... 1,240 0 ? 


TRINIDAD HAS GOOD ROADS; PRODUCES LIQUID OIL AS WELL AS ASPHALT 


It is the only part of the British West Indies which sells more to the United States than 
it buys. The difference is due largely to Trinidad’s exports of asphalt, motor fuel and 
crude oil. These were valued at over $1,000,000 in 1925. The oil wells, in the southwest 
near the asphalt lake, give this island probably the highest yield of petroleum per capita 
and per square mile of total area in Latin America. About 30 percent of its 1,755 square 
miles are considered possibly oil-bearing. 

Hardly any of our states have so few miles of highways, and none of 
them has so low a percentage of good roads as the average, 12.6 percent, 
for all the Latin American lands. The drier climate of Argentina accounts 
in large degree for her high percentage of good roads. In the case of 
Colombia and Venezuela, unquestionably the new roads built by the oil 
operators have helped to bring the percentage up. Tropical South America, 
notably Brazil, will not show a great increase in consumption of refined 
oils for some years because of the natural difficulties in the way of con- 
structing and maintaining good roads. With hardly more than 150,000 cars 
and trucks in all South America, it is found that a single state, Iowa, 
which ranks only ninth in the Union, possesses four times as many. The 
table above plainly implies that current consumption of petroleum products 


is independent of rural road conditions and extent. 


204 OILDOM: ITS TREASURES AND TRAGEDIES 


Other Reasons Which Retard the Opening of Oil Fields. Reference has 
already been made (on page 10) to the dubious attitude of the various Latin 
American states towards foreign capital which is eager to enter the oil 
regions. Aside from tax treatment and political turmoil, there are two 
outstanding reasons for the tardy development of the petroleum deposits 
south of Mexico. According to one authority* who returned early in 1924 
after. ten years abroad, these two reasons are the human element and the 
lack of efficient drilling machinery. This is more particularly true of Eu- 
ropean and Asiatic conditions where American drillers and American 
machinery are less well known than in Latin America. The writer would 
add also the climatic conditions, notably in Colombia and Venezuela. 


DORMANCY OF COAL AND DAWN OF OIL DEVELOPMENT 


South America’s Deficiency in Coal Deposits.; The energy resources of 
South America are neither so well balanced nor so widely distributed as 
those of North America. Though the development of her large oil fields 
is encouraging and though the potential water power on the east flank of 
the Andes is enormous, South America has smaller coal resources than any 
other continent. The contrast with North America is notoriously sharp. 
Mexico and Central America, however, have very limited deposits and yield 
less than 1,000,000 tons a year compared with more than 600,000,000 tons 
from the United States and Canada. Hitherto, Chili has been the chief 
source of solid mineral fuel mined in South America. The total annually 
obtained in all Latin America rarely runs over 2,500,000 tons, a quantity 
exceeded by 18 of the 30 coal states in the Union. 

Coal Consumption Inconsiderable. Owing to the climate and the lack of 
large industrial development the annual consumption of the entire South 
American continent is no more than what Colorado could supply with her 
10,000,000 tons a year. During 1924 Argentina imported almost 3,500,000 
tons of coal, nearly 90 percent British, and Brazil about 1,500,000 tons, half 
from Great Britain and half from the United States. Cuba, the rest of 
the West Indies, Central America and Mexico took together almost 1,200,- 
000 tons from the United States. To replace 10,000,000 tons of coal would 
require no more than 35,000,000 barrels of fuel oil or less than the expected 
output of crude in South America in 1925. 

A Quickening in Oil Production. As evidencing the virginity of the oil 
resources south of Mexico, a study of the production tables on pages 14- 
and below, will bring out several surprising facts. The longest producing 
country in South America, Peru, in 30 years has contributed only 50,000,000 
barrels or half of 1 percent to the world’s total of about 14,500,000,000. 


* TL. R. McCollum, sales manager of the Titusville Iron Works, quoted in The Oil and 
Gas Journal, April 3, 1924. 

+ Partly abstracted from ‘‘World Atlas of Commercial Geography,” U. S. G. S., 1921; 
read also ‘‘Coal Resources of the Americas,” by B. L. Miller, of Lehigh University, pub- 
lished by The Pan American Union, 1928. 

t According to the 12th International Geological Congress, the world’s coal resources, 
as shown in 1913, were as follows (in millions of metric tons): Colombia, 27,000; Chili, 
3,048; Peru, 2,039; the rest of South America, 10. Total, 32,097. United States, 3,838,657; 
Canada, 1,234,586; Mexico, Central America, etc., 505. Total North America, 5,073,481; 
Europe, 784,190; Asia, 1,279,586; Africa, 56,200; Australia, 165,572; New Zealand, 3,386; 
other islands, 1,452. Total Oceania, 170,410; total Eastern Hemisphere, 2,292,025; total 
Western Hemisphere, 5,105,528 (of which only 0.64 percent in South America) ; total 
world’s reserve, 7,397,553 (of which only 0.43 percent in South America). 


OILDOM: ITS TREASURES AND TRAGEDIES 205 


barrels to the end of 1926. By the end of 1927, Venezuela will rank ninth 
in accumulated output. Another truth, very surprising fact, relates to the 
large percentages which the output in 1926 and in the past five years made 
of each country’s aggregate to the end of 1926. Of Venezuela’s total pro- 
duction to the end of 1926, over 99 percent has been obtained in six years. 
Of Mexico’s 1,450,000,000 barrels, 61 percent has been procured during the 
period. 1921-26. 

Included in the total for Latin American are the trivial quantities of 
crude oil obtained in Cuba and elsewhere. Recent as the development has 
been in Persia, where 65 percent of the output has been procured in four out 
of thirteen years, it has not been nearly so rapid as in Colombia, where all 
the output was obtained after 1920, and in Venezuela where 92 percent 
gushed forth in the same short period. That Mexico is not yet a minus 
factor is emphasized by that fact that more than 11 percent or almost one- 
ninth of its yield in twenty-four years flowed to the surface during 1924; 
also by the fact that 84 percent of all Latin American petroleum produced 
in 1924 came from that nearby republic. 


The Outlook for the Future in Latin America. With four times as much 
credited to her as to all the rest of Latin America during the past four 
years (1923-1926), Mexico will likely remain the world’s second producer 
of petroleum until 1929. But in Mexico production passed its peak (of 
nearly 200,000,000 barrels) in 1921; whereas in South America, notably in 
the northwestern end and in the republic of Peru, the mining of mineral 
oil is gaining momentum each year. By 1928 the yearly yield of Mexico 
should easily be equaled if not exceeded by that of the rest of Latin America. 
All Latin America may by 1930 have an annual rate of output half that 
of the United States. 


OIL RESOURCES AND DEVELOPMENT OF MINOR COUNTRIES OF 
LATIN AMERICA 


Cuba, Richer in Ore Than in Oil Reserves. While Cuba contains deposits 
of asphalt, copper, gold, manganese and mineral oil, they are not known 


—The Texaco Star 


THE CUBAN SUGAR INDUSTRY TAKES FUEL OIL FROM MEXICO AND THE UNITED STATES 


Typical Cuban fuel-oil installation at a “Central” (plantation and mill). It is interesting to note that 
the bagasse or refuse from the mill is itself a source of liquid fuel (alcohol) and the fibrous part thereof 
can be made into the new building material. celotex. 


206 OILDOM: ITS TREASURES AND TRAGEDIES 


to be important compared with the 3,200,000,000 tons of iron ore reserves* 
found chiefly in Oriente Province. Asphalt seeps and veins or oil and gas 
seeps have been reported from every province, mostly in broken serpen- 
tine within Cretaceous beds above Jurassic limestone.** They are most 
common on the north coast. In western Cuba alone the asphalt is con- 
sidered proof of former large accumulations of oil, at least 20,000,000 bar- 
rels of which was evaporated or oxidized to leave the residuet From the 
wells at Bacurano, Province of Habana, about 4,000 barrels of oil are an- 
nually produced.t The per capita consumption (95 gallons, or 2% barrels, 
in 1923) the largest in Latin America although road conditions are not 
ideal. Outside of the United States, Cuba is one of the four best customers 
for Mexican crude oil. Our country is its principal source of refined prod- 
ucts. We supplied $6,200,000 worth in the fiscal year 1921-22. 


QUARRYING AND HAULING ASPHALT 


The Trinidad asphalt lake of 115 acres is 
only 138 feet above sea-level but over 175 
feet deep. Since 1888 it has supplied about 
5,000,000 tons of asphalt for paving famous 
avenues in leading cities. 


—The Lamp 

A unique model of this ‘“‘World Wonder” 
may be seen in the General Asphalt Com- 
pany’s Office at Philadelphia. 

Trinidad Long Celebrated for Its Lake of Asphalt. This island, believed 
once to have been physically a part of eastern Venezuela, is an important 
producer within the British Empire. Its asphalt lake is situated a mile 
from the sea and covers over 100 acres. Oil production began in 1908, fol- 
lowing the year in which Argentina entered the list. In all Latin America, 
Trinidad stood next to Mexico and Peru until 1922, when Argentina ad- 


* Supplement No. 51, U. S. Commerce Reports, 1923. 

** “Petroleum Reserves of the West Indies,’ A. H. Redfield, Am. Inst. Min. & Met. 
Enegrs., 1922. 

+The Oil Trade Journal of January, 1924, tells of the early (1899-1918) activities of 
Attorney Albert Wright, of later investigations by the geologists, Ralph Arnold and Barna- 
bas Bryan, and of the developments conducted on the Bejucal-Madruga uplift by the 
Haskell-Owens interests. 

~The concession at Bacuranao, Province of Habana, owned and operated by a local 
company, is the only active petroleum concession in Cuba producing crude. It has a 
progressively increasing production the past few years, amounting to 182,000 gallons in 
1924. The crude is carried by a pipe line to Minas and there loaded into tank cars. A con- 
cession in the Province of Santa Clara has produced a very light oil requiring almost no 
refining for use as motor fuel.—Foreign Trade Notes No. 40, Department of Commerce. 


OILDOM: ITS TREASURES AND TRAGEDIES 207 


vanced to third place. The greatest increase came in 1924 with a million 
more than the 3,050,000 barrels in the year before. The yield of 4,300,000 
barrels in 1925 tied Trinidad with British North Borneo (Sarawak) for 
twelfth in world rank and third position in the British Empire, India being 
first. Most of the 60 wells active in 1923 are British owned and located in 
fields south of the lake. Most of the oil is topped and sent to British mar- 
kets, but in 1925 about 65,000 barrels of gasoline was sent to the United 
States (the first such shipment having been made in 1924), besides 250,000 
barrels of crude and 70,000 tons of asphalt. 


Curacao Not Politically Part of Venezuela. It is a small island located 
northeast of the Gulf of Venezuela but not quite as close to the mainland 
as Trinidad. It is considered part of the Dutch West Indies although on the 
south side of the Caribbean. A Royal Dutch subsidiary operates a refinery 
on Curacao. The crude oil comes almost entirely from Venezuela, in low- 
draft vessels from Lake Maracaibo able to cross the 11-foot bar. In the 
last quarter of 1924 the imports amounted to 436,000 metric tons (about 
3,000,000 barrels). Exports in the same period consisted of 267,000 tons 
of crude oil and about 161,400 tons of fuel oil shipped in the deep-sea 
tankers; also 973,000 gallons of gasoline, 388,000 gallons of kerosene, and 
minor amounts of Diesel oil, benzine, gas oil and distillate. Venezuela 
should be credited with practically all of the petroleum which trade papers 
state is coming from Curacao. 


West Indies Otherwise Wanting in Oil. These islands, exclusive of Trin- 
idad and Tobago, do not constitute a promising area of oil reserves. Most 
of the West Indies present unfavorable structure or composition. The 
smaller islands, excepting Barbados, are made up of late eruptive rocks 
or flat-lying Upper Tertiary sediments. Of the Greater Antilles, only Cuba 
and Haiti-San Domingo seem to be geologically built for the accumulation 
of commercial pools of oil. 


—Texaco Star 


AMERICANS TESTING FOR PETROLEUM IN PANAMA 
The Carib Company’s No. 1 Well, Camp and Crew near David, Chirique Province, in 
this Central American Republic. Up to 1927 no commercial discoveries had been made 
in Central America although oil seepages are encouraging. 
Central America Not Promising in Petroleum. Nicaragua is notoriously 


voleanic so that recent lavas and tuffs conceal the underlying structure. 


208 | OILDOM: ITS TREASURES AND TRAGEDIES 


It is, however, possible that petroleum reserves are present. Guatemala 
and British Honduras are much better off, having jointly a broad zone of 
moderately disturbed Cretaceous and Tertiary sediments including bitumi- 
nous beds. It resembles the belt of Central Texas, which takes in Luling, 
Mexia, and Powell; therefore it should be explored more thoroughly. Hon- 
duras has seepages, but its strata have been more violently bent, broken and 
intruded than those of British Honduras and is accordingly not considered 
so promising as the latter, or even as Costa Rica and Panama. In some 
respects the region northwest of the Canal is analogous to the southern 
California oil fields, which differ, however, in not containing igneous intru- 
sions. The sediments of the California Valleys occupy wider areas and are 
more continuous than those of the coastal plain and foothills of Costa Rica — 
and Panama.* 

Ecuador Has Procrastinated in Petroleum Production. The presence of 
petroleum in Ecuador is mentioned as far back as 1700, but the year 1923°- 
was the first in which there was any substantial production. By the mid- 
dle of that year the daily yield had risen to 15,000 barrels. The chief com- 
pany is the Anglo-Ecuadorian, a subsidiary of Lobitos Oil Fields operating 
in Peru. Much interest has been shown in the Santa Elena peninsula and 
in the Oriente region. Ecuador has three small refineries.} 

Bolivia Badly Situated for Becoming a Big Producer. The oil deposits 
of this plateau region lie mostly east of the Cordilleras in a belt of seep- 
ages running from Argentina to central Bolivia. Near Santa Cruz oil is 
obtained from surface pools. Should oil be proven in commercial quanti- 
ties there would still remain the problem of getting it to market. It must 
either be brought south by long pipe line to the nearest navigable river or 
north through the very difficult and little known territory to the Madera- 
Mamore Railway and thence to the Amazon.f 


THE THREE GREAT “A B C” COUNTRIES 


Chili, the Champion Producer of Coal. This land belies its name for it 
needs but little fuel for heating. Most of the domestic coal and the im- 
ported oils are consumed by the copper and nitrate mines, the railways, 
and the industrial plants. While Chili is said to possess only one-ninth as 
large coal reserves as Colombia, it has been producing half of all the solid 
mineral fuel mined in South America. Lately, production thereof has de- 
clined £ so that the expansion of industry and commerce has in large meas- 
ure come to depend on imported products of petroleum, fuel oil in particu- 
lar. The receipts of such oil in 1924 from the United States alone, 4,800,- 
000 barrels, was equivalent to 1,500,000 tons of coal, or as much of the lat- 
ter as Chili ever produced in one year. This quantity was 2,200,000 barrels 
more than in 1923 when our shipments and those from Mexico amounted to 
4,300,000 barrels together. Gasoline imports were less than 3 percent of 
the total value of all oil receipts from our country in either 1923 or 1924, 
which were respectively $3,940,000 and $7,560,000. Foreign capital is not: 
fascinated with oil prospects in Chili and is leaving the wildcatting to local 
concerns. Eventually high grade oil from the Mendoza field in western 


* A, H. Redfield, U. S. G. S., in Mining and Metallurgy, July, 1922. 

+ W. J. Archer in the N. Y. Commercial, March 31, 1924. g 

+ According to Commerce Reports, July 6, 1925, has become demoralized because of 
competition with British and American coais and with American and Mexican fuel oil. 


OILDOM: ITS .TREASURES AND TRAGEDIES 209 


Argentina may be piped across the Andes, since this field is so high (6,600 
feet above sea level) and is situated within 200 miles of Valparaiso and 
150 miles of Santiago.* 

Brazil Has the Biggest Unexplored Area. Brazil, although the leading 
manufacturing country of South America, has not developed a great source 
of fuel within its borders up to the present time. In 1922 Brazilian coal 
mines produced only about one-fifth of the 1,600,000 tons of coal consumed. 
Prospecting and test drillings for petroleum have not located any deposits 
of great importance. The country has immense resources of water power 
well distributed throughout the populated areas, but the utilization of this 
power on an extensive scale is more or less remote. Investigations have 
shown that the Brazilian shale oil deposits are not only rich but that they 
cover extensive areas, especially in Bahia, Sao Paulo, and the States to 
the south. It is thought that the hope of a future national fuel supply lies 
in the development of these shale oil deposits, and this presumably must 
be brought about largely by foreign capital. 

Refined Oil the Leading Import from the United States. The United 
States of Brazil, with a population of 82,000,000, imported in 1923 about 
22,000,000 gallons of gasoline, 30,000,000 gallons of kerosene, 7,000,000 gal- 
lons of lubricating oil and grease, and 47,000,000 gallons of gas and fuel 
oils. .As there is no local production and no refining of imported crude, 
these totals indicate the present annual demand. The United States sup- 
plies practically the entire petroleum market, except for fuel oil, the larger 
share of which is brought in from Mexico. | Brazil is one of the most im- 
portant South American consumers of refined petroleum, from the view- 
point of the American exporter, being second only to Argentina. In 1928 
the United States exports of petroleum to Brazil were valued at more than 
$9,500,000 and in 1924 at more than $12,600,000. In the latter year 30,- 
400,000 gallons of gasoline made up 47 percent of the total value; 26,400,- 
000 gallons of kerosene, 33 percent; 7,100,000 gallons of lubricating oil, 15.8 
percent. 

Argentina Filling Two-Fifths of Her Home Demand. Despite the cheap- 
ness of draft animals, the use of tractors is growing, chiefly in breaking 
and plowing land and in road ‘building. About 6,000 farm tractors were in 
use in Argentina at the middle of 1925; there would be more but for the 
high cost of motor fuel and oil. Consumption is greater, however, for 
autos, heating, lighting, industrial plants and railways not to mention the 
bunker demand. Per capita consumption had been higher than in other 
South American countries until 1924, when Chili passed the 50-gallon mark. 
Demand in 1923 was for 9,800,000 barrels, 35 percent of which was met 
with home production of heavy oil; and in 1924 it called for more than 11,- 
500,000 barrels, 41 percent of which was supplied from domestic deposits. 

Sources of Argentina’s Imported Supply. Of the 1,100,000 barrels of 
gasolina bought from abroad in 1928, over 54 percent came from the 


—. 


* For additional details read “Argentine Petroleum Industry and Trade,” by G. S. Brady, 
Trade Information Bulletin No. 81; also “U. S. Trade With Latin America in 1924,” by 


' J. R. McKey and H. S. Giusta, T. I. B. No. 345, U. S. Department of Commerce. 


j Director Julius Klein’s introduction to “Petroleum in Brazil,” by M. A. Cremer, T. I. 
B. No. 311, January, 1925, U. S. Department of Commerce, supplemented with statistics for 
1924. See also “Oil Possibilities in Brazil,’ by the late J. C. Branner, in Mining and 
Metallurgy, June, 1922, American Institute Mining and Metallurgical Engineers. At one 
time a very active American held a concession of 13,000,000 acres in Santa Catarina. 


poy pun bry— 


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NVLITOdOWSOD V ‘VIAVGVAIN OXOGOWOI 


OILDOM: ITS TREASURES AND TRAGEDIES 211 


in 


-Cordillera at El Quemada, in Jujuy 


bilities of future production appear to lie almost entire 


Cordilleran ranges and valleys. 


at Plaza Huincut, 
ly in the Argentine plain 


\\ 1 Vas 
S \P SANTA FE a 
( 
===. 


“yoo URUGUAY 


A 


> 


leum has been obtained from the folded cretaceous beds below 


less than 1,000,000 from the Triassic, 


are 


E GRAVEL AND GREAT FLOWS OF BASALTIC ROCKS 


To the end of 1926 about 32,000,000 barrels of petro 


the plain at Comodoro Rivadavia in Chubut territory ; 


[\ gas 
0, 
ean 


a 
Liz 


little from the Jurassic or Cretaceous of the pre 


According to Redfield possi 


and the relatively narrow belt of pre- 


LOCATION OF 
ARGENTINE OIL FIELDS 
@ _—s*FIELDS IN EXPLOITATION. 


~ @  PETROLIFEROUS AREAS. 
=== MAIN LINES OF RAILROAD. 


NU Noreen | ; 


ERED BY PLEISTOCEN 


miles 


ARGENTINA—THREE-FOURTHS A VAST PLAIN OF NEARLY FLAT MESOZOIC AND TERTIARY BEDS COV- 


Neaqun territory; and lately a 


Province. 


United States, over 23 percent from Peru and 21.2 percent from Mexico. 
In 1924, of 1,500,000 barrels, 42 percent came from our country, 25.6 per- 
cent from Mexico, and 31.3 percent from Peru. Our contribution of kero- 
sene fell off slightly—from 78 percent of 61,800,000 gallons in 1923 to 73 
percent of 64,700,000 gallons in 1924. Receipts of crude and fuel oil re- 
mained stationary, being 4,700,000 barrels in 1923 and 4,800,000 barrels in 
1924, being almost evenly divided between Mexico and the United States, 
with a little crude in 1924 from Peru. : 


212 OILDOM: ITS TREASURES AND TRAGEDIES 


Development of Comodoro Rivadavia. This field is still practically the 
sole source of domestic petroleum (see map, page 211). It was accidentally 
discovered near the coast of southern and arid Argentina while boring for 
water in December, 1907, at a depth of 1,755 feet. Oil from Comodora 
Rivadavia is heavy and asphaltic averaging a gravity of 18.5° Baumé. It 
is therefore heavier than Gulf Coast crude of Texas and yields very little 
kerosene and much less gasoline—from 12 to 20 percent of both. The area 
within a 15-mile radius of the discovery was declared a reservation and has 
since been developed exclusively by the Government. It turnd out to be 
the best part of this coastal field. The output of 125,000 barrels in 1913 
slightly exceeded that of the foregoing five years. Extraneous coal sup- 
plies for public utilities were cut off during the war and forced more rapid 
deyelopment. From 1,150,000 barrels in 1917 the yield increased to 1,750,- 
000 barrels in 1921. Little Trinidad, beginning its own production in 1908, 
had led Argentina up to 1922 when the output of the latter reached 3,000,- 
000 barrels. It rose from 3,400,000 in 1923 to 4,700,000 barrels in 1924, 
but was still less than half of 1 percent of the world’s production and 
hardly one-thirtieth of Mexico’s output the same year. In the last year 
3,400,000 barrels came from Government wells, making 74 percent of the 
total from Comodora Rivadavia.+ 


LOADING PIER 
FOR TANKERS 
TAKING CRUDE 
OIL FROM COMO- 
DORO RIVA- 
DAVIA 


The absence of 
natural harbors 
along the southern 
coast of Argentina 
at times make diffi- 
cult the shipments 
to Buenos’ Ayres, 
1,000 miles away. 


PERU HITHERTO THE PRINCIPAL PRODUCER 


An Oldtimer in Oildom.* Spanish pioneers had dug ditches and shallow 
wells along the coast and had used the evaporated product as pitch for caulk- 
ing boats and ships. Modern enterprise began in 1867 with the drilling of 
wells and the erection of a refinery by Prentice of Pennsylvania. The com- 


+ For description of the other Argentine fields see accompanying map. 

* Read “The Ancient and Modern Oil Wells of Peru,” in The Lamp, December, 1921; 
‘“‘Petroleum Industry and Trade of. Peru and Ecuador,’”’ T. I. Bulletin 178, U. S. Depart- 
ment of Commerce; ‘‘Oil Exploration of Peru,’’ Bulletin of the Union Oil of California, 
July, 1923; The Rig and Reel Magazine, June, 1923, and various papers by V. F. 
Marsters, in Mining and Metallurgy, American Institute of Mining and Metallurgical En- 
gineers. Early in the 20th century W. L. Hardison, an associate of the late Lyman Stewart 
(see frontispiece) formed in Los Angeles a company composed of Gen. F. H. Flint, M. 
Whittier, C. W. Brown, et al. They got 41° oil in five wells 150 to 250 feet deep drilled at an 
elevation of about 138,000 feet in the world’s highest oil field near Lake Titicaca. 


OILDOM: ITS TREASURES AND TRAGEDIES 218 


pany which succeeded him at Zorritos produced in 1901 about 75,000 bar- 
rels of very light oil. This field has maintained its annual yield at that 
rate during the past decade. The foremost field, Negritos, was first de- 
veloped in 1874 under the direction of Edgar Fowks, an American. One 
of the three wells then spouted from a depth of only 60 feet while another 
flowed 400 barrels daily from 3380 feet. Herbert Tweddle began British 
operations here in 1888. His company brought in its eighth well in 1899 
at 545 feet and this continues to produce, thus evidencing the long life of 
wells in the Negritos field. More than ordinarily colorful is the story of 
operations carried on by Ed. L. Doheny, Sr., one of the most picturesque 
and powerful figures in American petroleum history. Thirty-one years ago, 
or six years before he pioneered Mexican petroleum, this Californian com- 
menced drilling in Peru, but soon afterwards abandoned activities at Ne- 
gritos because of unusual developments at home. 


— 


ZORRITOS, THE THIRD 
FIELD IN CURRENT YIELD 
IN PERU 


The output of the 3 fields in 
1926 approximated 11,000,000 
bbls. About one-third was ex- 
ported to the United States— 
over 3,600,000 bbls., valued at 
more than $8,000,000 f. o. b. 
New York. 


Negritos and Lobitos the Leading Sources. The small yield of the Res- 
tin field (106,000 barrels in 1921) is statistically included with the much 
larger yield of the nearby Lobitos field which is now second only to Negri- 
tos. The first attempt of a British company to find oil between Lobitos and 
Restin resulted in failure. Its wells, credited with 75,000 barrels in 1905, 
were taken over by the Lobitos Oilfields, Ltd., in 1908. This producer in 
1924 got more than a million barrels from both fields which it controls. 
Standard of New Jersey indirectly owns the rest of Peru’s production. 
Negritos is the source of 80 percent of the present output of Peru—almost 
8,000,000 barrels in 1924 compared with 6,400,000 in 1923. The two prin- 
cipal sands vary in depth from 1,500 to 2,000 feet and from 2,600 to 3,000 
feet. The quality of the oil is far superior to that of the La Rosa field in 
Venezuela, but the huge potential yield of the latter will likely permit it to 


¢ Tweddle is said.to have discovered the great Baku field in Russia. A son of William 
Keswick is still identified with the development although his original company, the London 
and Pacific Petroleum Company, together with two other operators’ were absorbed in 1914 
by the Canadian branch of the Standard Oil Company of New Jersey: (Imperial Oil 
through the International Petroleum). 


214 OILDOM: ITS TREASURES AND TRAGEDIES 


surpass Negritos in 1925. However, it is claimed that the richest of all oil 
areas in Peru lies in the little explored “montana” region east of the 
, Andes. 

Peruvian Trade in Petroleum. The import trade of both Ecuador and 
Peru is unattractive to the United States for two reasons: (1) Of the 
combined population of about 6,000,000, some 90 percent consist of Indians 
and “mestizos” whose purchasing power is next to nothing, thus differing 
radically from Argentina; and (2) the domestic output of oil, particularly 
in Peru is of such high quality and large quantity that the five refineries 
in the two countries supply nearly all the local demand for gasoline and 
kerosene. Thus in 1924 Peruvian imports of petroleum products from the 
United States amounted to less than two-thirds of a million dollars and 
was made up almost entirely of lubricating oil and grease, and paraffin 
wax. Similar imports into Ecuador did not quite reach $150,000 in value 
compared with $106,000 in 1923. ( 

Comparative Position in United States Trade. On the other hand, about 
two-thirds of the Peruvian production of more than 6,000,000 barrels in 
1923 was sold to foreign consumers. In that year 18.6 percent of the 
$100,000,000 worth of all her exports were made up of crude and refined 
oil. The United States alone bought from Peru 1,550,000 barrels of crude 
oil in 1923 and 2,440,000 barrels in 1924. Peru’s petroleum exports, crude 
and refined together, ranked third, or next to sugar and cotton in value 
during’ 1923. These shipments, while quantatively equalling those of Vene- 
zuela in 1928, were hardly half as great as the latter in 1924. The north- 
ern oil, like that from Comodora Rivadavia in Argentina, is not worth as 
much per barrel because it is best adapted as fuel oil to compete with coal. 
While the Plate river republic must buy foreign oil until its light oil areas 
shall have been developed, Peru, Ecuador and Bolivia, because of the nature 
of their inhabitants, can not be looked upon as promising customers in the 
petroleum trade of the United States. South American markets for our 
refined products can be expected to expand mainly in Brazil and Chili. 
Peru should, however, retain a prominent place in our receipts of “raw” | 
petroleum, but below both Colombia and Venezuela. 


COLOMBIA, A COMING IMPORTANT PRODUCER 


Districts Near Coast Disappointing. Surface signs are numerous in 
Colombia. Some, near the Caribbean Sea, are well located for transporta- 
tion but have not signified much so far.* The potential production of the 
republic as a whole has no tyet been determined.t The cost of delivery 


* Unsuccessful so far, both in the Bolivar field near El Carmen, Standard of California 
has drilled below 4,000 feet and Gulf Oil Corporation to about 3,800 feet. To find oil in 
commercial quantities near the coast, future operations will be deep and expensive. The 
De Barco concession of about 2,350 sq.. mi. (see map), if developed to production must 
await an outlet to Lake Maracaibo through Venezuela which it borders. See ‘‘Colombian 
Oil Fields in 1924,” by L. G. Huntley, American Institute Mining Engineers. 

t Ww. J. Archer, in New York Commercial, March 31, 1924. According to C. W. Wash- 
burne and K. D. White, Colombia has an almost ideal situation with respect to the world’s 
markets, being but a short distance from the Panama Canal and the West Indies. The 
sailing distance from its Caribbean ports to New York (about 1,800 miles) is less than 
that from Tampico, Mexico, and practically the same from its Pacific seaboard. No other 
South American country borders on both oceans. A very complete 18-page story of 
petroleum in Colombia appears in a commercial and industrial handbook (Special Agents 
Series No. 206, Department of Commerce) by P. L. Bell, Trade Commissioner; 70 cents, 
Superintendent of Documents, Washington, D. C. 


OILDOM: ITS TREASURES AND TRAGEDIES 215 


at tidewater will average more than in Venezuela owing to longer pipe line 
haul as shown below. Since 1922 the Tropical Oil Company’s refinery at 
Barranca-Bermeja has supplied all domestic demands, 


Development in the Barranca-Bermeja District. Colombia’s first pro- 
ducer was completed in 1918 by the Tropical Oil Company on the De Mares 
concession 400 miles inland. This tract covers 2,061 square miles—70 miles 
along the Magdalena and Carare rivers and averaging 30 miles wide. 
Roberto De Mares obtained the concession in 1905 from the government and 


i 
+ 


= 
o 
+ 
ny 


SRR a, Pe ian so enonaen  VeastonnomnennanE Ze 
FG RREN WICH 


ae 
: 
| 


} Barrens Dies 
t tds ie gay 
i a8 
Carthagen y, : 
H fa * 


H 
t 


1 


» 4} 
Jn} 


* 


A 


| Senet ag casey pene re ees apne SSS HRCA 


Santa Martone oie 
a) a 
: piles PP 


| . 


p 
\ 4 


ao) 


/ | Pysracnno’ 
GULE OF Pe a 
WY DARIEN | 


j Be SE 
GULP or bp) 


PANAMA 


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i i oH 


i 


Pap OS 4 see ps ee 
Gime gond Istana? 4 j 


{ 
1 
ht 
‘ 


a -- es Sanne sant 
—Am. Inst. Min. & Met. Engrs. 
RELIEF MAP OF COLUMBIA AND WESTERN VENEZUELA AROUND 

THE LAKE MARACAIBO BASIN 
Colombia is nearer New York than any other Latin-American oil coun- 
try. Note the location of Barranca-Bermeja on the Magdalena River, over 
half way between the seaport, Cartagena, and the capital, Bogata, in the 


mountains. See other map for location of the Andian pipe line and 
Manomal, its terminal near Cartagena. 


OILDOM: ITS TREASURES AND TRAGEDIES 


ww 


BARRANCA-BERMEJA REFINERY AND TANKS OF TROPICAL OIL CO. 


d Metallurgy. 


ming an 


° 


—M 


"As 


OILDOM: ITS TREASURES AND TRAGEDIES 217 


was organized in 1916 for the purpose of exploring the concession, begin- 
ning in 1917. In 1920 the International Petroleum Company, Ltd., a sub- 
sidiary of the Imperial Oil Limited acquired control in the Tropical Oil 
Company. Since then development has made enormous strides despite 
many obstacles. ' 


Las Infantas Field Has the Principal Proven Structures. Drilling has so 
far been confined to the northern part of the property, 35 miles east of 
Barranca-Bermeja.° During 1924 19 rigs were operated by the Tropical 
Oil Company on three neighboring structures. This “infant” enterprise 
was attended by a staff of doctors and nurses besides 300 foreign employes 
and over 3,000 natives. Road maintenance alone in this rainy region re- 
quires a large force—after finishing the expensive clearing and grading 
through the jungle-mantled hills. The Infantas field has wells scattered 
over a distance of six miles—17 completed to the end of 1924 out of 28 
altogether on the De Mares concession. 


Actual and Potential Rate of Production. By early 1925 some 30 wells 
had been drilled to the oil sand on this concession, proving the existence 
of oil over a wide area. Four different oil horizons total 250 feet in thick- 
ness within a depth of 2,260 feet (comparing with the depths in Mexico). 
A life of 20 to 30 years is claimed for the producing wells the initial yield 
of which varied from 1,000 to 3,000 barrels daily. Almost all of the wells 
of the Tropical Oil Company are shut in while the pipe line is building. 
Only half a million barrels were withdrawn from the wells in 1924, or very 
little more than in 1923 when Colombia was credited with 425,000 barrels. 
The potential output of the 30 odd wells of the Tropical Oil Company alone 
is said to be 50,000 barrels daily, equivalent to more than 18,000,000 bar- 
rels or nearly twice as much as Venezuela produced in 1924, 


American Capital in Control as in Peru. While practically all the petro- 
leum hitherto obtained in Venezuela has come out of British and British- 
Dutch concessions (Royal Dutch-Shell leading by far), 100 percent of the 
Colombian output has come out of the American owned concession named 
above, and most of the other companies operating in Colombia are of 
American origin. Next to Tropical Oil Company (subsidiary of Interna- 
tional, which controls five-sixths of the Peruvian production) interest cen- 
ters in the operations of the Colombian Syndicate (said to be in the hands 
of New York bankers and the Agwi). Its properties are close to those of 
the Tropical Oil Company and through both of these the 360-mile pipe ‘line 
of the Andian National Corporation has been laid between Baranca- 
Bermeja and Cartagena. (See view of first tanker load, page 172.) 


Immense Mineral Wealth Awaiting Attention. A few minerals have 
already made Colombia famous. In gold it still leads all South American 
nations after mining it since Spanish colonial days. It excels the rest of 
the world in emeralds* with stones worth $14,000,000 each year. Since 
Russia relapsed, Colombia has become the world’s chief source of plati- 
num. The output thereof in 1923 was valued at $4,000,000. These three 
later enlisted the aid of Pittsburgh oil men.t The Tropical Oil Company 


* Like salt, emerald mining is one of the government monopolies which brings big revenue. 

y These men were J. C. Trees, George W. Crawford, M. L. Benedum, and Senator John 
S. Weller. Imperial Oil, Ltd., which indirectly obtained control from them, is a subsidiary 
in turn of the Standard Oil Co. (N. J.). Much of this information has been abstracted 
from The Lamp, August, 1924. 


A 


ITS TREASURES AND TRAGEDIES 


OILDOM 


18 


2 


*s10}B1edO UBdIIeWW 0} posBeT SI YyoryM 
jO jared oS1el B@ ‘poq aye] 94} MOTEq Wory Surwmi0d Mou 
SI uorjonpord 4ey} SMOYS MOIA aIOYS JeyjouUW “OO TIO 
uooveg-ung ey} JO sioJZeNbpeey [eI0[ ey} SMOYS SIYT, 


VIHAZANGA ‘OdIVO 
-V4UVW ANVI JO AUOHS DNOTV ANOS IVOIGAL 


ANDIAN NATIONAL PIPE LINE BETWEEN BAR- 


RANCA BERMEJA AND TERMINAL SOUTH OF 


CARTAGENA, COLOMBIA, COMPLETED 


IN MAY, 1926 


OILDOM: ITS TREASURES AND TRAGEDIES 219 


minerals approximate $25,000,000 in their combined annual value. Never- 
theless, the country’s mineral resources remain largely latent. Most nota- 
bly true is this of coal, the deposits of which in Colombia constitute six- 
sevenths of all South America’s known reserves of that fuel. In coal and 
railway development it is pretty much on a par with the Philippines,} 
where, however, the search for oil was lately abandoned after one company 
had spent more than $1,000,000. 


Low Density of Population Implies Undeveloped State. With an area 
twice that of France, but with only one-third of its territory inhabited, 
there extend vast stretches about which little is known. The factor most 
unfavorable for early and rapid economic development is the lack of trans- 
portation facilities. Unless the hydroplane route is followed, ten days must 
be taken to travel from the seaboard to Bogota, the capital. A unified 
railway system must be developed to solve this serious problem. Because 
of this deficiency and because of the great distances, life is centered along 
the Magdalena river which is navigable for 830 miles. The deepening of 
the old Digue canal, 85 miles long, from Calamar to Cartagena, will allow 
river steamers to unload at the deep-sea wharves and thus reduce the re- 
loading cost. 


Commerce and Oil Consumption Will Grow With Greater Highways. 
Roadbuilding, stimulated to some extent by oil development, helped to in- 
crease the imports from the United States $6,700,000 in one year. They 
were $29,000,000 in 1924 compared with $22,300,000 in 1928; but less than 
1 percent of these imports in 1924 consisted of petroleum products.t In 
the other South American countries refined oil made up from 1 percent in 
the case of Bolivia to 20 percent in the case of Brazil. Exports to the 
United States advanced from $46,000,000 in 1923 to $58,000,000 in 1924. 
Coffee alone accounted for $50,000,000 or six-sevenths of last year’s exports 
to our country. 


{ See the author’s article in The Engineering Magazine, February, 1906. Colombian coal 
beds contain nine times the 3,000 million tons credited to the coal reserves of Chili. See 
“The Fuel Supply of the World’ by L. P. Breckenridge, Mining and Metallurgy, February, 
1921. Read “Colombia’s Riches Reviewed by Bank’ (the Royal Bank of Canada) in the 
New York Times, July 3, 1925. 

t The operation of the refinery at Barranca Bermeja to a large extent has dispensed with 
imports of petroleum products. 


TYPICAL SCENE IN COLOMBIAN OIL FIELDS 


220 OILDOM: ITS TREASURES AND TRAGEDIES 


VENEZUELA A VERITABLE TREASURE VAULT FOR PETROLEUM 


Is Venezuela Replacing Mexico as a Petroleum Eldorado? American 
producers look to this South American republic as the greatest future 
source of supply.* The first commercial well was drilled in 1914 by the 
Caribbean Petroleum Company, then a subsidiary of the General Asphalt 
Company. Control soon passed to the Royal Dutch group which continued 
with success in the Mene Grande district. Elsewhere developments in the 
Maracaibo basin were disappointing until the Borroso No. 2 of the Vene- 
zuelan Oil Concession, Ltd., drilled itself in December 14, 1922, in the La 
Rosa field (page 11). This proved one of history’s great wells, flowing 
wild 120,000 barrels daily for nine days. Later the same company made 
big discoveries west of the lake at La Paz and Conception in the district 
of Maracaibo.} 


Geology and Physical Geography. Venezuela is next to Colombia the 
northernmost country of South America, and extends almost to the Equa- 
tor. Its western part is in the same longitude as New England. It is half 
as large as Mexico and almost as large as Texas, Oklahoma and Kansas 
combined. Venezuela has a varied climate according to elevation which 
largely determines the three zones of mountains, plains (or llanos) and 
forests. The main topographic divisions are: (1) The Guiana highlands 
south and east of the Orinoco; (2) the great central plains extending 650 
miles east and west; (8) the northeastern branch of the Great Andine 
chain entering from Colombia on the southwest; (4) the low Lake Mara- 
caibo region in the northwest. Two distinct major oil districts have been 
differentiated: (1) The Caribbean, which includes the Maracaibo basin 
(four states) and the State of Falcon, and (2) the Eastern Venezuela or 
Orinoco basin from the delta to the Para promontory and including part 
of the interior state of Guarico. The formations of the former range in 
age from Cretaceous to recent and include limestone conglomerate, sand- 
stone and shale up to 15,000 feet thick. Where these rise to outcrops on 
the edge of the Maracaibo basin ay supply seepages for which this re- 
gion is famous.¢ 


Maracaibo Basin Compared with California. Producing horizons in the 
Maracaibo district are analogous to the so-called “oil zones” of the Los 
Angeles basin and the San Joaquin valley in California. There is a re- 
markable similarity of physical character of the producing horizons, the 
geological age is approximately the same (Miocene and Eocene, see page 
27), and the general structural conditions are almost identical.** These 


* Julius Moritzen in The Baltic-Scandinavian Trade Review, November 19, 1924. 

+ Michael O’Shaughnessy, author of ‘‘Venezuelan Oil Handbook.’’ 

t “Oil Industry in Venezuela,’’ by Senor Lucio Baldo, representative to the International 
Petroleum Exposition, October, 1928. J. W. Lewis in ‘“‘Transactions of the Am. Ynst. 
Min. and Met. Eners., 1923,’”’ refers to a very small part of the 400-mile -“‘horseshoe”’ of 
outcrops marked by oil and gas seepages. At the northern end of the Meme Grande anti- 
cline, he and Frank Widde (in 1913) mapped 4,000 separate oil seeps and more than 600 
acres of asphalt—making probably the world’s most spectacular surface signs of oil. 

** Hirst noted by the California geologist, Ralph Arnold, according to E. B. Hopkins 
and H. J. Wasson, page 190, “Petroleum in 1924,” A. I. M. E. The bulk of the proved 
production comes from Miocene oil sands; less from Eocene formations. ‘The Cretaceous, 
though petroliferous, is highly metamorphosed in the uplands where exposed, and in the 
basin is too deeply buried to be the source of commercial output. The general structure is 
that of a horseshoe shaped geosyncline with its center occupied by Lake Maracaibo. 


OILDOM: ITS TREASURES AND TRAGEDIES _ 221 


conclusions are evidence more and more with the progress of development. 
Even the rotary method of drilling, the use of which is practically estab- 
lished in Venezuela, is patterned after California practice. 


aves * 
~~" ae ; 


wary 


NNOs 


ih 


NM 
B 


—Photo by Arthur Knapp. 
LA ROSA, LEADING VENEZUELAN FIELD IN 1926 


Previously, Mene Grande had been foremost. Lago Petroleum, with leaseholds extend- 
ing over the lake, is here competing with the Gulf and Dutch-Shell in drilling line wells, 
a common practice in the United States. (See Mining and Metallurgy, July, 1925, and 
page 88, Oil and Gas Journal, November 25, 1926.) 


Production and exports from Venezuela in 1926 approximated 36 million barrels, making 
this country fourth in the world, displacing Persia. 


Mene Grande and La Rosa the Foremost Fields. The Mene Grande field 
is on the eastern side of the lake or about 70 miles southeast of the city of 
Maracaibo. It yields oil intermediate in gravity to the Mexican heavy and 
light oils. The La Rosa field (see page 11) lies on the lake shore about 25 
miles southeast of Maracaibo. Its oil is two degrees lighter than that 
from the Mene Grande field and about two:degrees heavier than the Gulf 
Coast oil of Texas. In the following table is shown the importance in 1924 
of these two fields compared with others in Venezuela, two of which, La 


Paz and Conception, both producers in 1925, are located on the west side of 
Lake Maracaibo. 


New Production in Wells pro- Gravity, Age, 

Field Wells 1924, barrels ducing degrees years 
Ie OmCEDATICEGS rate cietae sole hem creel ws aae 16 5,240,000 3% 18 9 
ET MMLLOS Mis eer aa alee, asereia Sue te. 8 eS ooh ous «felgie 13 2,960,000 20 20 3 
MVC TA CIMT oh. es oai ev es'ahate ¢, a'e’ two eke wats Hoe eee ja 1,050,000 25 SY! 2 
Ne AMMBE TEL Zp eta Pochaliars ot curs a ee oheko ars ee 6 8 sueke: See 2 None shipped 3 28 1 
Conception) tm eam.>s BARS ats item Mente. 2) suct ovens i None shipped se 37 il 


Tremendous Potentiality; Production Tied Down. Assuming that only 
75 wells were producing throughout 1924, the average per well would 
make 123,000 barrels, equivalent to almost 340 barrels per day or 50 times 
the average in the United States. One authority rates Santa Rosa alone 
with a daily capacity of 200,000 to 400,000 barrels, or the same as 73 to 146 
million barrels per annum, if the wells were all opened wide. This does 
not seem to be a great exaggeration in view of the fact that several wells 
have been credited with 50,000 to 75,000 barrels initial yield under high 


New wells completed in 1924; none were dry except six in El Mene where the 
total completed was therefore 17 producing wells as of January 1, 1925.. 


222 OILDOM: ITS TREASURES AND TRAGEDIES 


gas pressure and that no dry wells have yet been drilled. Many wells else- 
where around Lake Maracaibo were either pinched down or entirely shut in 
pending improvements in transportation. It is not hard to believe that 
Venezuela will produce between 45,000,000 and 50,000,000 barrels in 1927. 
Future output will be limited largely by conditions in the world markets 
and by the availability of transportation facilities.* 

British Capital Dominates Production. After nearly nine years of oil 
productivity in Venezuela, American capital has barely begun to share - 
therein, as shown in the following list of potentially producing concerns as 
of late 1924 (name of oil field and daily capacity in barrels within paren- 
theses): Royal Dutch-Shell, through management of Venezuela Oil Con- 
cessions, Ltd. (La Rosa, 30,000), (La Paz, 20,000) and (Conception 10,000); 
Royal Dutch-Shell through ownership of Caribbean Petroleum Company, 
(Mene Grande, 15,000) and of Colon Development Company (De Oro, 2,000) 
and (Tara, 2,000), making owned and controlled altogether 79,000 barrels 
or 53.5 percent of the total; Lago Petroleum (Sir James T. Currie, Pres.) 
(La Rosa, 30,000 from wells, 1,500 to 1,900 feet deep); Creole Syndicate} 


EL BANO WELL OF THE SUN-BEACON 
OIL COMPANY 


This Philadelphia concern owns concessions 
on 1,500,000 acres in the district around Lake 
Maracaibo. It is a subsidiary of the Sun Oil 
Company. 


Among other large companies interested in 
Venezuela may be mentioned the Atlantic Re- 
fining, Anglo-Persian, British Controlled Oil- 
fields, British Equatorial Oil, New England 
Oil Corp., Pure Oil Co. (owning Orinoco Oil), 
Sinclair Consolidated, Standard of California 
(owning Richmond Oil), Standard of New 
Jersey (through Standard Oil Co. of Vene-. 
zuela), The Texas Co., and Union Oil Co. of 
California. 


Gulf Oil Corp. jointly with Lago Petroleum 
is developing the new and deep Lagunillas 
field in Venezuela, these two having three- 
fourths of the 27,000 bbls. daily yield early 
in 1927. Although the discovery well was 
not completed before August, 1926, Lagunillas 
has. already moved ahead of Mene Grande 
and ranks next to La Rosa in daily production. 


* According to the Mexican-Venezuelan Service Bureau, quoted in The Oil and Gas 
Journal, January 22, 1925, the deepening of the Lake Maracaibo outlet for ocean-going 
tankers has béen abandoned; likewise the pipe-line-plan of the Dutch-Shell interests. 
Engineering, economic and political difficulties prevent the dredging of the bar now 11 feet 
deep. As was the situation in the Panuco field of Mexico for some time, so for the 
present Venezuelan oil must continue to be removed from the Maracaibo basin by shallow- 
draft tankers to deep harbor (s) for trans-shipment. See reference to Curacao on a pre- 
ceding page. (The second ‘“‘c’? in Curacao is sounded like ‘“‘s.’’) 

t Of 25 West 48rd St., New York; C. K. McCornick, president; H. G. Cortis, vice-presi- 
dent, and Robert Trumpley, secretary-treasurer. For further details see article. by Michael 
O’Shaughnessy in The Oil and Gas Journal, December 18, 1924, recent proceedings of the 
Am. Inst. Min. and Met. Enegrs., U. S. Commerce Reports of June 30, 1924, and recent issues 
of The Wall Street Journal, March 2, 1925, ete. Oil News of London for December 27, 


OILDOM: ITS TREASURES AND TRAGEDIES 223 


jointly with Venzuela Gulf Oil Corporation, both American (La Rosa, 
30,000). 


Venezuela Advanced in 1925. .A gain of about 11,000,000 barrels, or almost 
120 percent, over the output of 9 million in 1924 placed this republic 3 
million ahead of Rumania, which hitherto had ranked sixth in world pro- 
duction. The actual exchange in rank occurred early in 1925. Two new 
shipping fields began operations—La Paz and Conception—making a total 
of five, all located in the Maracaibo Basin. Exports were made through 
the port of Maracaibo by the three principal companies: Dutch Shell, Largo 
Petroleum, and Venezuelan Gulf Oil. They amounted to 19 million barrels. 
The difference between output and export represented oil refined locally, sold 
as fuel and consumed in drilling operations.* 

The La Rosa field was more active in 1925 than all the others, due to 
competitive drilling of the V. O. C., Ltd., Lago Petroleum, and Venezuelan 
Gulf Oil Co. whose wells range from 1,450 to 2,800 feet in depth. Mene 
Grande, monopolized by the Caribbean Petroleum Co., was extended to 3,300 
acres total proved. The outstanding feature of El Mene development by the 
British Controlled Oil Fields was the bringing in of a 980-foot well for 
2,100 barrels early in 1925, followed by others of high initial, with rapid 
decline to settled yield. In El Mene were drilled seven dry holes, the only 
ones in Venezuela, making the average hazard rate in 1925 only 4.4 percent 
for all the fields, or zero percent outside of El Mene. With the laying of 
pipe lines La Paz—Conception—Punta Piedras, water shipments began in 
July and totaled 550,000 barrels by the end of 1925. New discoveries 
include the Ambrosia pool, apparently an outlier of La Rosa field, and the 
Guanoco, a heavy-oil field near Guanoco asphalt lake in eastern Venezuela. 
The former was found 6% miles north of La Rosa, under Lake Maracaibo, 
and hardly half a mile from shore, at a depth of 1,378 feet. 

Output in 1924 and 1925. .The following figures are based on tables com- 
piled by the American Petroleum Institute and E. L. DeGolyer: 


World lLatin-Am. (Million bbls.) Per- World lLatin-Am. (Million bbls.) — Per- 


rank country 1924 1925 cent rank country 1924 1925 cent 
Orme MEXICO a «tee oe ne 140 115 10.8 16% Colombia +..:.:.... 0.4 1.0 a 
6 Venezuela ........ 9.0 20 1.9 Cubate ete: oc ema. .01 .01 
SSEECYUA oer scree. © 7.8 9.1 9 

Ul PArcentinae.. 5.3 4.7 6.5 6 

IGT tet ats Fee Were eee ee es 4.1 5.0 0.5 Total Lat.-Am.. 165 156.6 14.8 


During the three years 1923-1925, production was practically stationary, 
South American gains being offset by Mexican losses. There will be notice- 
able increase south of Panama after the completion of the Columbian pipe 
line (May 1, of 1926) and the deepening of the outlet from Lake Maracaibo. 
Two countries improved their rank in 1925: Venezuela displaced Rumania, 
and Peru passed India. Never theless, because of Mexico’s loss, Latin 
America’s percentage of the world total dropped from 16.3 in 1924 to 14.8 
in 1925. The world increase of about 50 million from about 1,015 million 
barrels in 1924 was almost equaled by that of the United States and was 
about 10 million more than the output of all South America in 1925. 


* Standard of N. J. has arranged for rights to the B.C.O. output above the 20,000-barret 
limit controlled by the Shell interests. The daily production of the B.C.O., Ltd., was around 
6,000 barrels early in 1926, according to The Wall St. Journal, Feb. 8, 1926. Most of the 
data above was abstracted from an A. I. M. E. paper by E. B. Hopkins, consulting geologist, 
and H. J. Wasson, geologist for the New England Oil Co. 


224 OILDOM: ITS TREASURES AND TRAGEDIES 


MEXICO, LAND OF SILVER, SISAL HEMP AND HEAVY OIL 


Wealth Is Vast and Varied; Unevenly Distributed and Developed. De- 
spite its large areas of arid, semi-arid and mountainous land—hardly 40,000 
square miles, or 5 per cent of the total, being tillable—Mexico is immensely 
wealthy due to her vast deposits of minerals, and in less measure to her 
range in climate. Because of the latter and the topography this republic 
is rather independent of foreign importations of food, fibers and forest 
products. . Since half of the country lies within the tropics, her agricul- 
tural products are extremely varied. Except for certain, manufactures, 
Mexico is surprisingly self-sustaining. Her people, mostly of mixed and 
pure Indian blood, are devoted mainly to farming south of the 24th paral- 
lel and to grazing and mining north thereof. After agriculture, mining is 
Mexico’s oldest and most important industry; but the revolution raised 
havoc with it as it also hindered the development of the oil industry, 
though less permanently.* A premature revival in mining began in 1920, 
but no marked improvement was noticed before 1923.7 


Significance in Our Latin American Trade. With few exceptions, 
Mexican farm and range products are raised for home consumption; min- 
eral products for export mainly.t While Chili supplies most of the nitrate 
needed by American farmers and others, it is Mexico that cultivates the 
maguey plant in Yucatan from which we get sisal hemp or hennequen of 
commerce for making binding twine. Ten years ago, the United States 
bought more than twice as much of such hemp as of mineral oil from 
Mexico; and excluding gold and silver, this fibre then made up one-fourth 
of all our Mexican imports in point of value. While our imports of hen- 
nequen, hides and coffee were falling off after 1912, our takings ot petro- 
leum have tremendously increased. From 12 per cent of $93,000,000 worth 
of all our Mexican imports in 1913-14, mineral oil advanced to nearly 55 
per cent of $167,000,000 in the calendar year 1924. The $91,000,000 worth 
of oil was then equivalent to half the value of our receipts of coffee from 
all Latin America in 1923. While we buy a little more from Brazil and 
twice as much from Cuba, on the other hand Mexico, at least in 1924, was 
more than twice as big a customer as Brazil. Strange to say, Mexico is 
our third best Latin American customer for petroleum products. For 
obvious reasons, our purchases of Mexican petroleum has helped to main- 
tain our profitable export trade in refined mineral oil. 


* Despite the exigencies of war, which marked the Spring of 1915 in Mexico’s petro- 
leum belt, property damage sustained was relatively small. Greatest sufferer was the 
Mexican Petroleum Co., at Ebano, where Villistas fought Constitutionalist forces. The 
company lost several steel tanks including one of 55,000 barrels capacity while three 
similar ones were badly damaged. Oil losses aggregated 150,000 barrels. Buildings were 
more or less ruined by shell fire. Eventually the Villistas were driven back. But in May 
they occupied the Panuco fields, stopping river shipments. Due to ample storage at 
Tampico, actual exports were not affected. Pipe-line transportation from the southern 
fields to either Tampico or Tuxpam was not interrupted.—Geo. Blardone in The Oil and 
Gas eras January 138, 1916, reprinted in ‘‘U. S. Mineral Resources,” 1915, Part II, 
page : 


{+ Compared with the high record of production in 1912, the year 1923 showed 11.7 
per cent increase in silver, 48 per cent in lead, and 1,360 per cent in zine. Copper and 
gold decreased 6.7 and 25.4 per cent respectively. The Mexican Embassy, according to 
the Wall Street Journal of July 28, 1925, reported the output in 1923 to be 342,600,000 
pounds; lead, 117,400,000 pounds; copper, 6,200,000 pounds; silver, 638,000 ounces, troy of 
gold, and minor. amounts of mercury, zine ore, graphite, manganese and arsenic. Mexico 
keeps it place as the world’s leading source of silver, the second in lead, the fifth in 
gold and the seventh in copper. 


. Iron and coal are the only important mineral products not produced for exporta- 
tion, for they do not suffice for the domestic demand. 


OILDOM: ITS TREASURES AND TRAGEDIES 225 


MEXICAN PETROLEUM PRODUCTION 


The Mexican Oil Fields: Location and Area. There are two oil re- 
gions: (1) The Isthmian or Minatitlan and (2) the Tampico-Tuxpam. 
They are 300 miles apart although largely within the State of Vera Cruz. 
The former is located on the Isthmus of Tehuantepec and yields the light- 
est oil in Mexico, but on a scale rather scanty. ‘The important producing 
fields occur in the northern part of Vera Cruz and across the Panuco 
river in Tamaulipas, 300 miles below the Rio Grande.* The oil territory, 
embracing much barren ground, extends over 25,000 square miles. Con- 
sidered semi-proven is 10,000 square miles of which one fifth is owned by 
one American company alone. Productive to date are fewer than 25 local 
fields or pools aggregating less than 100 square miles. 


Noteworthy Physical Features of the Tampico-Tuxpam territory, which 
lies within the Gulf Coast plain,* include (1) the absence of natural har- 
bors other than the mouths or lower channels of the larger streams, the 
bars at the entrance of which must be dredged; (2) the belt of lagoons, 
too shallow for ships but navigable for flat boats, notably the long Tami- 
ahua; (3) the wide and flat valley of the Panuco wherein bedrock is ob- 
scured by a blanket of recent deposits, and (4) the low, conical hills which 
mark the surface signs-of volcanic plugs. As a fitting background for the 
oil fields and coming closer to the coast the farther south, the oil bearing 
Tamasopo limestone turns up.on edge 60 to 70 miles west of Tampico and 
there helps to form the Sierra Madre along the border of the highlands. 


Structural and Economic Geology. The general structure of this re- 
gion—the source of 99 per cent of the Mexican oil—is that of a monocline 
of Cretaceous, Tertiary and Quaternary strata dipping easterly under the 
Gulf. The principal oil-bearing beds are iimestones and limy shales of 
Cretaceous—Eocene age. The parent rock appears: to be the Tamasopa 
limestone which still retains much of the oil in its uppermost and cav- 
ernous horizon. It thickens from 3,000 feet in the latitude of ‘Tampico to 
fully 10,000 feet towards the south. It deepens also in the same direction, 
being beyond reach of the wells drilled south of the Tuxpam. Along 
volcanic necks and dikes of basalt. much of the oil has migrated upward 
into.the San Felipe shale and limestone, and into the overlying Mendez 
‘marls and clays.+ 


Quality of the Crude Oil. Except for the minor and much lighter oil 
obtained from Furbero and the Isthmian fields, Mexican petroleum presents 
two grades: (1) The so-called light crude (considered heavy in the United 
States) is found in the southern fields, that is, in the string ‘of pools ex- 
tending south from Dos Bocas to Alamo, and (2) the heavy crude coming 


* This plain is locally known as ‘‘La Huasteca” or (climatically) as ‘Tierra Caliente.” 
From three to ten miles inland it is low, sandy and destitute of vegetation. Back of this 
narrow belt the surface, covered with q dense growth of tropical plants, rises gradually 
to the foot of the steep ascent of the Sierra Madre. The Gulf Coast plain is about 60 miles 
wide south of parallel 22° North and widens farther north to 150 miles, Partly abstracted 
from “Plain Facts About Mexico” by G. J. Hagar, Harper & Bros. 

j The domes of the light-oil area appear localized along a crescentic anticline (or major 
fault ridge?), the “Golden Lane” of Mexico’s past production. The Tamasopa limestone 
represents organic deposits formed on a sinking sea-bottom when the Gulf of Mexico was 
connected with the Gulf of California via the submerged Isthmus of Tehuantepec. This 
enormously thick limestone is considered the equivalent in age to the Woodbine sand of 
east-central Texas (Powell), southern Arkansas (Smackover) and northern Louisiana 
(Caddo and Haynesville). See part V in the revised ‘‘Manual for the Oil and Gas Industry,” 
Bureau of Internal Revenue, 1921; also ‘(Mexican Petroleum’? by W. J. Archer, 1922. 


226 OILDOM: ITS TREASURES AND TRAGEDIES 


FLOATING OIL ON TROUBLED WATERS 


A beautiful scene in the Southern or Light 
Oil field a little north of the Tuxpam River, 
showing bamboo growth in the background 
and seepage oil on the surface of a small 
stream. 


The pacifying effect of petroleum on stormy 
waters is well known. Unfortunately, in in- 
ternational relations oil apparently adds fuel 
to the flames of diplomatic disagreement. As 
a reward for contributing heavily to the finan- 
’ cial support of the Mexican Government, the 
confiscation of their oil properties acquired 
before 1917 is bitterly opposed by American 
and British producers of Mexican petroleum. 


from the Panuco valley fields which include the various sectors of Panuco 
proper as well as the Ebano, Chijol and Topila fields or districts. The light 
crude runs from 19° to 22° Baumé and yields 10 to 13 per cent gasoline 
by topping. The heavy oil has a gravity ranging from 10° to 15° and is 
chiefly used as fuel oil, with or without topping. Most of the Mexican oil 
is of aspalt base, but a small per cent of paraffine wax has been obtained 
from the light or southern oil. Some of the latter has been completely 
refined, giving 35 per cent lubricating distillates.* 


Torrid Temperature a Peculiarity of Mexican Petroleum. The crude 
oil is characteristically warm to very hot. The temperature varies from 
90° to 181° Fahrenheit (32° to 88° Centigrade) as the oil leaves the ground. 
Its average temperature in the Ebano field is 105° F., and at the Dos Bocas 
well the salt water and oil was as hot as 165° F. This natural liquid for 
some reason becomes generally warmer the farther south the wells are 
located between Ebano and Alamo. The temperature of the oil is of great 
value from an economic viewpoint in that it decreases the viscosity of the 
fluid and permits it to move more freely through the pipe lines. At times, 
therefore, the temperature has been a factor in determining the rate or 
daily production. As it is, most of the heavier or sticky crude must be 
heated.+ 


* According to Col. George A. Burrell, in National Petroleum News, February 4, 1920, 
a considerable portion of the light oil is completely refinable: Gasoline, up to 15 per cent; 
kerosene, 7 per cent; light lubricating distillate of 26° gravity, 25 per cent; heavy lube 
distillate of 20°B., 10 per cent; gas oi] and coke, 15 per cent, and 1.8 per cent by weight, 
of refined wax. Some of the heavy oil contains fully 65 per cent asphalt. Lighter oils, 
richer in gasoline, are found farther south, as at Furbero (gravity 24° B.) and in the 
Tehuantepec or Isthmian field (36°). In October, 1924, it was reported that oil as light 
as 50° B. had been found in the Huasteca Company’s No. 8 Tres Hermanos at a depth of 
3,785 feet and with an initial yield of over 2,000 barrels. 


t The light oils have the higher temperatures. See U. S. Commerce Reports of Octo- 
ber 24, 1921; also the author’s chapter on the Mexican Oil Fields in the revised “Manual 
for the Oi] and Gas Industry,’”’ U. S. Treasury Dept., 1921. 


OILDOM: ITS TREASURES AND TRAGEDIES 227 


ONE OF THE 
MANY VOLCANIC 
NECKS 


These plugs have 
penetrated the  oil- 
bearing shales and 
limestones with sills 
extending horizon- 
tally here and there. 
In cooling and con- 
tracting, voids were 
left for the oil to fill 
very close to the ba- 
salt. This view, taken 
near Ebano, shows 
oil- tanks of the 
Mexican Petroleum 
Company. —From photo by the author. 


A QUARTER CENTURY OF MEXICAN TREASURES AND TRAGEDIES 


American Entrepreneurs Establish the Industry.* In May, 1900, C. A. 
Canfield and E. L. Doheny, at the suggestion of the president of the Mexi- 
can Central Railway, examined the prospects tributary to that line and lo- 
cated west and southwest of Tampico. So well impressed were they with 
the remarkable seepages that they acquired 450,000 acres in fee before com- 
pleting the first well. This event occurred on May 14, 1901, oil being struck 
at the shallow depth of 545 feet. It marked the beginning of the Mexican 
Petroleum Company’s operations in the Ebano field along the railway, 35 
miles west of Tampico. In April, 1904, the first gusher in Mexico was 
brought in by this company. It flowed 1,500 barrels daily, a modest affair 
compared with the smashing records which followed in the southern fields. 
Unfortunately, no substantial markets for this oil of fuel grade was secured 
until in May, 1905, when the Mexican Central Railway Company contracted 
for 6,000 barrels daily. Considerable asphalt had been made, however, for 
paving use in Mexico City. As a result of Mr. Doheny’s personal investiga- 
tions south of the Panuco River, lands in the Southern oil district were ac- 


quired in 1905 and 1906. 


* History of Pre American Petroleum Development. The earliest reference to oil as an 
industry was the recording, in 1857, of an agreement whereby a group of merchants in 
Tabasco were to exchange cacao for iron sheets needed in making oil tanks. The natural 
product, known as “illuminating oil,’”’ came from a spring near Macuspana within the 
Isthmian fields. In 1865 the Government authorized a Spaniard to exploit deposits near 
San Jose de Jas Rusias, Tamaulipas. The favorable results led to the organization of a 
company in 1868 by Mexican planters for exploiting petroleum seepages and springs lo- 
cated near Furbero, Vera Cruz. This attempt and another made in 1878, also near Furbero, 
proved failures. In 1876 a Boston sea captain brought back with him from Tuxpam some 
“chapopote”’ or tar. This caused. the forming of a company to drill for oil on leased land 
known as Chapopote Nunez and Cierro Viejo, just north of the Tuxpam River and 35 miles 
north of Furbero. A, little oil was obtained in two wells about 500 feet deep, only two 
miles from the Potrero del Llano field of subsequent fame. Lacking financial support for 
expansion, the old captain became discouraged and committed suicide in the early eighties. 


Later on Cecil Rhodes’ attention was attracted to the oil possibilities south of the 
Tuxpam. His syndicate, the London Oil Truct, spent $400,000 in a futile fashion, and 
its successor similarly spent fully $300,000. This affair was finally and unfairly abandoned 
beeause of the unfavorable report made by a young geologist sent to Mexico by Sir Bover- 
ton Redwood. Had these early explorations been extended north of the river and per- 
sisted in a little longer, there is no telling but what British instead of American capital 
would have benefited the most from the development of Mexican mineral oil. Early in 
this century, even the Geological Institute of Mexico had grown pessimistic with regard 
to the creation of a petroleum industry in that country based upon its domestic resources 
—U. S. Commerce Reports, September 13, 1920, and “Mexican Petroleum” by W. J. Archer, 
1922. For detailed history of Mexican petroleum from the days of the Aztecs to the middle 
of 1922, read the article in The Lamp of August, 1922, contributed by R. Leibensperger 
chief geologist for the Transcontinental. d 


7 Sixteen years later, this well was flowing 800 barrels daily, a loss of 1 h 
per cent, an evidence of the wonderful vitality of Mexican wells. a AD aad 


228 OILDOM: ITS TREASURES AND TRAGEDIES 


PATRIOT, PIONEER AND PROPHET 
“Man of Vigor and Vision’’ 


Edward L. Doheny, Sr., in a prophetic 
attitude at one of the huge seepages in 
the Light Oil district to the south of 
Tampico (see Chapter XII). 


The oil exudes here from joint. cracks 
in the lava rock near the contact between 
a voleanic ‘‘neck’’ or “‘plug’”’? and the sur- 
rounding sedimentaries. This view was 
taken by the author in 1921 within Mora- 
lillo near the Buena Vista River and the 
historic ruins of Piedra Labrada situated 
about five miles west of Cerro Azul, the 
world’s greatest oil well. (This Doheny 
discovery of February, 1936, is still pro- 
ducing—near the “blue peak’ of the same 
name.) 


—From photo by the author. 


British Capital Contributes to Quick Development. In 1904:an affilia- 
tion of “El Aguila” (or Mexican Eagle, then a Pearson interest)* opened 
the much lighter oil deposits (of 26° Baume gravity) at Furbero, 125 miles 
south of the Ebano field (the oil from which is extremely heavy, viscous and 
asphaltic). The output in 1917 was hardly 35,000 barrels compared with 
more than 1,100,000 from Ebano. In 1908 the Pennsylvania Oil Company 
(taken over by the Mexican Eagle) brought in a 2,500-barrel well (San 
Diego No. 2 at 2,006 feet) in the Dos Bocas pool (see map). Four months 
later, on July 4, 1908, the famous Dos Bocas gusher (S. D. No. 3 came in at 
1,825 feet) but caught fire almost at once. The flow was estimated at 150,- 
000 to 200,000 barrels a day, so that some 10,000,000 barrels. of oil burned 
by the end of August, when salt water replaced the oil. Thus was ruined 
an entire pool. Over $38,000,000 worth of oil and equipment was destroyed 
in this disaster; but Lord Cowdray (then Sir Pearson) did not lose courage. 
The efforts of Mexican Eagle were finally crowned with success despite a 
financial struggle with the Waters-Pierce Oil Co.. As narrated below, six- 
teen months after the Dos Bocas disaster, Lord Cowdray’s company came 
into its own with the drilling of a monster well. 


*In 1902 the same interest had begun operations in the Isthmian zone, later building 
a large refinery at Minatitlan; but production was never important, dropping from 226,000 
barrels in 1915 to less than 1,000 in 1919. The occurrence of petroleum in the Tehuantepec 
field is connected with salt domes and is thus similar to the Gulf Coast fields of Texas; 
but the oil-bearing formation, a Cretaceous dolomitic limestone, is older than some of the 
oil sands of the latter, according to A. H. Refield in Engineering and Mining Journal, March 
19, 1921 (see pages 27 and 36). 

yj When the author passed by it in 1921 sulphurous salt water was still gushing out 
of its huge crater, at a rate of over 1,000,000 barrels daily according to one informant. 


. te —— 


OILDOM: ITS TREASURES AND TRAGEDIES 229 


A Memorable Period in the’ History of Mexican Petroleum. The year 
1910 ushered in a new era in the evolution of the Latin American oil indus- 
try. In February was found the Potrero del Llano pool through the drill- 
ing of a 500-barrel well to the depth of 1,933 feet. But not before the day 
after Christmas did Potrero No. 4, from a depth of 1,911 feet, belch forth 
one-fifth of a million barrels per day. Offsetting these achievements of 
the Mexican Eagle, the Doheny company drilled in Juan Casiano No. 7 on 
September 11, originally making about 70,000 barrels a day. Thus was 
established the commercial value of Mexico’s light-oil area through the 
discovery of two great pools 25 to 80 miles apart. This crescentic “Golden 
Lane,” has gone down into oil history replete with tremendous treasures 
and tragedies. The greatest sensation was reserved for early 1916, an 
event foreshadowed by the eminent oil geologist, Israel C. White (page 65). 


—Los Angeles Oil Bulletin. 


PART OF THE SMALL CASIANO BASIN, VERA CRUZ, MEXICO 
One of the pumping stations of the Huasteca Petroleum Co., a subsidiary of the Mexican 


Petroleum Co. (Pan-Am. Pet. and Transp. Co.) ; daily capacity 60,000 bbls. 

Finding The Major Field of Heavy Oil. In the same year, 1910, only 
a decade after the arrival of Messrs. Canfield and Doheny, the major field 
of the Northern district, 15 miles southeast of Ebano, was discovered by 
the East Coast Oil Co., (a Southern Pacific subsidiary). The first Panuco 
producer, one mile southwest of the village of that name, was then brought 
in at 1,781 feet, but good only for 10 barrels daily. This was a small be- 
ginning for the Panuco field whose various sectors are now producing twice 
-as much as all the southern fields.* It has never been as spectacular as 
the Southern district, its big wells rarely running beyound 10,000 barrels 
daily. In 1914, however, the Corona (Royal Dutch Shell), at 1,806 feet, 
brought in a 37,000-barrel well located but two miles from the discovery 
well.7 

Three Famous Fountains of Oil. The world’s most celebrated and com- 
mercially successful wells are the Cerro Azul No. 4, the Potrero del Llano 


* The heavy-oil or northern district, to which Panuco belongs surpassed the southern 
district in production during the week ended March 24, 1923, the former then averaging 
205,000 barrels daily. For thirteen years the light-oil district had held the leadership. 

tj As in the United States, the initial yield of big wells has often been exaggerated. 
From 100,000 to 150,000 barrels daily was variously claimed for Corona No. 5. From 1917 
to 1925, chiefly in 1921, a number of southern wells came in at 30,000 to 100,000 barrels— 
from three to ten times as great as the gushers of the Panuco, Ebano and Topila fields. 


230 OILDOM: ITS TREASURES AND TRAGEDIES 


and the Juan Casiano No. 7. The last, while not the discovery well of the 
Casiano-Tepetate field, was easily shut in, permitted to flow 20,000 to 25,- 
000 barrels daily and by November, 1919, had alone drained the larger 
twin pool of its 85,000,000 barrels of petroleum. Not nearly so sensational 
as the other two, it may never be surpassed by a single producer outside 
of Mexico. Similarly, the Potrero pool was exhausted almost entirely by 
one well. Potrero del Llano, ran wild for 8 weeks, its pressure being 270 
pounds greater per square inch. More than 10,000,000 barrels of oil escaped 
to the sea down the Buena Vista and Tuxpam Rivers* The greatest 
gusher of all is said to be the Cerro Azul No. 4. Most spectacular was 
its spouting of oil to a measured height of 600 feet. The gas pressure 
was terrific, destroying the derrick and throwing the 2-ton drill bit and 
stem out of the well and 125 feet away. The gigantic force was finally 
chained in one-sixth the time it took to capture its nearest rival, Potrero 
del Llano. 


—Courtesy of W. J. Archer 


POTRERO DEL LLANO NO. 4 IN 1926 
This famous well went to salt water Christmas, 1919, but in the spring of 1926 


was yielding 1,000 barrels of oil daily. 
Yield, thousand bbls. 


Year Name of well Life, Rock Depth, Initial 
drilled years pressure feet daily Ultimate 
1910:  JuaniCasiano NOM is cele ginsks Gs civic eee 9 580 lbs. 2,112 70 85,000 
1910 Potrero del Llano No. 4......... HAAG Caines: 850 lbs. 1,911 200 93,800 


1916 fCerro Azul No. 4.......cecceeeeee sidbielee iat cee. OSDir DS: 15752 261 Active 


* During the revolutionary days, ten years ago, the Mexican Eagle Oil Co. enclosed 
their great well in a solid cement black for protection against the frolics of the warring 
factions.—The Oil and Gas Journal, March 5, 1914. 


{In February, 1921, the author saw the drill stem at the spot where 16 feet of it was 
driven into the ground within ten feet of the moving-picture operator. The well itself is 
obscured by a mound of earth piled up to prevent fire. Cerro Azul has been flowing al- 
most 11 years, or since February 10, 1916. Potrero del Llano came in December 26, 1910, 
and Casiano No. 7, September 11, 1910. The average daily yield of the last named was 
over 21,000 barrels, but little less than the combined daily output of Pennsylvania’s 75,000 
wells in April, 1925. Cerro Azul No. 4, to May 1, 1925, had produced 76,177,637 barrels 
of (Mexican) light oil. In August, 1925, it was averaging 6,000 barrels daily, equivalent 
to a yearly rate of 2,000,000 barrels. The Wall Street Journal, August 1, 1925, was 
wrongly informed in a dispatch from Mexico that Cerro Azul No. 4 has become the world’s 
second largest producer. Casiano No. 7 will likely retain that honor fully four years 
rider bac Both now belong to Pan American (Eastern) which is controlled by Standard of 
ndiana. : 


OILDOM: ITS TREASURES AND TRAGEDIES 231 


Marvelous Manifestation of Southern Wells. From 1910 to 1921 there 
were discovered 8 or 9 light oil pools which before 1925 had each produced 
from about 11,000,000 barrels (Zacamixtle) to 250,000,000 barrels (Lower 
Chinampa). Of the great gushers born along the crescent—Dos Bocas to 
Tierra Blanca—four have already been referred to. They were the great- 
est the world had ever known. Many of the others exceeded 50,000 and 
even 75,000 barrels daily initial, comparing with the Lucas gusher and the 
Lakeview, the two greatest in the history of the United States. In the 
course of 15 years, through fewer than 400 perforations about 825,000,000 
barrels of Mexican light oil was extracted. To flow an equal volume of 
water, the Potomac at Great Falls would need nine days. Impressive 
indeed is the outbreak and the capture of the wild wells. Oil men outside 
of Mexico are mystified by the unfailing uniformity in the daily produc- 
tion of each well not offset. Outsiders are no less startled by the state- 
ment that pumping wells are “rare birds” in the Tampico-Tuxpam region.* 
With so few wells drilled in the southern district, the average daily yield 
per well has been very high—at one time over 2,000 barrels compared with 
only 6 or 7 barrels in the United States. 


The Explanation of the Extraordinary Behavior. In both the heavy and 
light oil fields of Mexico the propellant is not gas but hydrostatic pressure, 
that is, the force of imprisoned sea water, “fossil salt water’ as it may be 
called. It is not connected with the open ocean, neither is it like the arte- 
sian water which feeds into porus beds from a higher elevation and owes 
its pressure to such a head. Eventually salt water appears in all Mexican 
wells, and in some cases very suddenly replaces the oil. Such was the fate 
of Juan Casiano No. 7 which for 110 months maintained a daily flow of 
about 22,000 barrels.} Moreover, Mexican petroleum, as found in the Tam- 
pico-Tuxpam fields, appears to move underground in an unrestricted man- 
ner. Connected and more or less open passages are likely present in the 
cavernous limestone or along its contact with the shale. The cooling and 
consequent contraction of the igneous intrusions, also left channels along 
the contact with the sedimentary beds for the free flow of the liquid fuel. 


Comparison of Mexican with American Fields. The oil fields of the 
United States differ greatly from those of Mexico, geologically as well as 
commercially. The age of the former varies greatly (page 26) while that 
of the other is almost entirely late Cretaceous and early Tertiary. Owing 
to this fact our oils have a much greater range in quality—from the heavy 


*It is safe to say that fewer than 4 per cent of the wells in the United States are 
flowing at any one time. Probably less than ten out of Pennsylvania’s 75,000 are producing 
under natural pressure. The first well in Panuco to be placed permanently on the pump 
was the Penn-Mex Fuel Company’s No. 1 Tessada, according to the Fuel Oil Journal, No- 
vember, 1913. This contradicts the broad statement on page 820 of Pogue’s excellent 
“Economics of Petroleum’’ to the effect that no pump has ever profaned the casing of 
any Mexican well. “These wells are born in the full virility of their gigantic powers. 
They live like giants, straining at the chains that bind them, and they die as giants should, 
stricken as by a thunderbolt.’ 

_} Since so few of the world’s oil wells are located in synclines (pages 23 and 24) re- 
placement of oil with salt water becomes their inevitable fate. In Mexico and the Gulf 
Coast fields of Texas a rise in temperature of the oil gives warning of the coming tregedy. 
Most of the light-oil pools of the Tampico-Tuxpam region have gone to salt water largely 
or entirely during the past six or seven years. According to Edward DeGolyer, a well 
on lot. 190, Amatlan, closed as non-productive September, 1921, was reopened in 1922 and 
early in 1923 was yielding 1,700 to 2,000 barrels daily. A well in Alazan pool (just north 
of Potrero del Llano) produced intermittently during four years after the first appearance 
of salt water, a total of 2,000,000 barrels, and early in 1923 was flowing about 2,000 barrels 
daily. More than half the oil obtained in the United States is from wells which have 
shown or now make salt water, and wells are still being drilled in the older and partly 
abandoned Mexican pools for “strippers.” 


Paz No. 1 


—The Texaco Star. 
tial production, 40,000 bbls. daily, cut to 7,000 when pinched on account 


ini 


. 
> 


SCENES FROM MEXICO’S MAJOR OIL FIELD—PANUCO 
The 4,000,000 bbls. of Mexican crude produced by the Texas Co. in 1922 made 2.2 per cent 


1922 at 2,084 feet 
of the total for all producers. 


also (lower three views) the heavy oil, of about 14 degrees Baumé, discharging into earthen res_ 
in 


Note coating of ice on flow line to pit caused by expansion of gas accompanying the oil. 


late 


of salt water. 


A well of The Texas Company of Mexico, closing in the gusher, and the quintette which ‘‘captured’’ the 


ld well 


wi 
ervoir. 
came in 


fuel oils of California to the light Pennsylvania grade which is rich in 
gasoline, kerosene and lubricants. Our fields are more scattered; the active 
Mexican fields are almost confined to two parts of one State. Ours have 
been producing 65 years—three times as long as the Mexican fields. It 
was necessary to drill 660,000 wells (not all successful) to produce 8,300 
million barrels of American oil by the middle of 1925; but only 3,000 
wells have been drilled in Mexico to deliver 1,300 million barrels. Some 
800,000 live wells in the United States were July 1, 1925,-averaging 6.5 
barrels daily from a weighted average depth of about 3,000 feet while no 
more than 1,000 producing wells in the other republic averaged about 300 
barrels each from an average depth of no more than 2,000 feet.* Both dry- 


* According to Blardone there were 870 producing wells in Mexico, June 30, 1924. 
These had an average daily yield of 439 barrels per well or a total of 382,000 barrels, a 
little more than the average daily of Texas throughout the year 1924. 


OILDOM: ITS TREASURES AND TRAGEDIES 238 


well hazards and drilling costs are from 2 to 5 times as great as in the 
United States. Comparisons below are made with oil fields in three States 
where conditions do not entirely differ from those prevailing in Mexico.+ 


Point of comparison Gulf Coast Mexico California Arkansas 
Producing area, miles...... 25-30 90-100 185 50-60? 
Usual geological structure... Salt dome Faults, folds Anticlines Low domes ? 
Age, chief oil horizon...... Ter., Quat. Cret., Ter. Tertiary Cretaceous 
Range of depth, feet....... 100-4,500 1,400-2,700 400-6,737 1,100-2,800 
Average depth, 1925........ 3,100? 1,900-2,100 3,200? 2,300? 
Quality of oil—base........ Asp. & Par. Asphalt Asph. (paraf.) Asphalt 
Quality—gravity range, B... 15°-32° 10°-22° 11°-41° 13°-31° 
Heavy oil, 1925 (10°-25°).. 100% 100% 58% 85% 
ASSOLINGSVICIG < wsore orss0.di0 808. Low Low Variable Low 
Temperature of oil F....... Up to 110° 90°-181° Gas pressure Ordinary 
Natural propellant ........ Gas pressure Hydrostatic p. 2,250 mil Gas pressure 
Output to end of 1925, bbls.. 530 mil. 1,360 mil. 670,000 175 mil. 
Average daily, Aug., 1925... 100,000 260,000 Long B. mid’y 240,000 
Price at well, Aug., 1925... $1.25-1.50 $1.00-1.20 $1.25-2.40 $.85-1.35 
Prineipalsmarketsis. «css. Dom. and For. Foreign S.W. U.S.,For. Domestic, U.S. 


pris: < eeoeral ee cpeueemame yc. aemammmmcemesr 4 ame 
te one ‘ q : Be § * 


ey 4 
| ae ax 


—The Texaco Star. 
FIELD STORAGE FOR THE HEAVY MEXICAN CRUDE OIL 


To reduce its viscosity this oil is usually heated before pumped through pipe lines. Mex- 
ican conerete reservoirs can hold about 25 million bbls.; steel tanks, about 59 million bbls. 


PRODUCTION AND TRADE IN MEXICAN PETROLEUM 


Six-sevenths of World’s Oil from North America Republics. Considered 
together, the United States and Mexico occupy a unique position in the 
world’s mineral industry. They contribute about 60 per cent of the copper, 
lead and silver, and almost the same per cent of the zinc. In the last 
named metal the southern republic has made huge gains in the past two 
years. Mexico is now first in silver and second in lead but only seventh 
in copper. It became a commercial producer of petroleum in 19@1, the 
same year that Russia attained her peak with 51 per cent of the world’s 
167 million barrels. Mexico’s rise in mineral oil was almost meteoric up 
to 1921 when her output (variously estimated at 193 to 202 million bar- 
rels) equalled the entire world’s production in 1903. In 1905, before Mexico 
reached the million mark, the United States alone controlled over 62 per 
cent of the world’s current yield. In 1911, when Mexico produced 12.5 
million barrels, and ranked third for the first time, the two republics con- 


: j These four regions are more or less similar in the age and quality of the oil, it be- 
ing mainly used in direct competition with coal as fuel for railways, steamers, etc., and 
for making gas. Some is cracked into gasoline. Considerable lubricants have come out 
of grade A Gulf oil and the lighter California oils. Of late years the latter has proven 
twice as rich in gasoline content as the average oils from the other three regions. 


234 OILDOM: ITS TREASURES AND TRAGEDIES 


tributed 68 per cent. In 1918 Russia lost second place to our neighbor,* 
sixteen years after losing first place permanently. The following table 
shows how the two border republics improved their joint position from 
1916 to 1923 when they controlled exactly seven-eighths of the world’s 
output of petroleum. Altogether, during the 10 years, 1916-1925, the two 
supplied 84.3 per cent of 7,400 million barrels.} — 


Millions of barrels World Millions of barrels World 
Year U. S. Mexico Total pct. Year U. S. Mexico Total pct. 
POUG Se oeress otolactere 300.8 . 40.6 341.4 74.0 LO DT sears cbse cate 472.2 1938.4 665.6 87.0 
VOU ise cae oer le ree 835.3 55.3 390.6 78.7 go 2 ACA a tpatidl A 657.5 182-3 739.8 86.0 
TOUS she sctere este tscs 356.0 63.8 419.8 83.4 PODS ate wee 433.0 ~ 152.0 885.3 87.5 
LOW were She ee eaO LO 87.1 465.5 84.0 1 ODA Sen ersits eee 720.0 141.0 861.0 84.5 
POZO as wetetactcae 443.4 168.5 606.9 87.3 1925 as ore ee 764.0 116.0 880.0 82.0 


Panuco The Premier Field at Present. Cacalilao was not found before 
late 1922 but by the end of 1923 had produced about 45 million barrels of 
heavy oil. It reached its peak in 1924 with an output of 69.4 million bar- 
rels. Being considered merely a northern sector or extension of Panuco 
proper, the latter is generally credited with Cacalilao’s output. Panuco 
contains other outliers and is an extensive area or composite field not com- 
parable with the: small and single pools listed below under the southern, or 
light oil district. The latter, centering about 60 miles south of Tampico, 
lost its leadership in May, 1928, when the heavy oil district forged to the 
front. The inevitable salt-water invasion began in 1921, and in 1923, the 
yield of light crude fell off by the enormous amount of 74 million barrels 
from the 1922 total of 188 millions. This loss in a single year exceeded 
twice the peak production of either Illinois, Louisiana or Pennsylvania. 


OUTPUT OF MEXICAN PETROLEUM FROM NORTHERN FIELDS AND SOUTHERN 
POOLS IN 24 YEARS 


Year of Production in million barrels Total 


Area, Field or Pool discovery To the end of 1923 During 1924 to 1925 
Panuco (including Cacalilao)........... tiee'et OL OLO 270 93 363 
Ebano (including Chijol)..... Bratgls Glatetaroistsce gees LOO 28.4 6.3 34.7 
Topila ..... Sialeete Grates atte diate ata Si aletovelene witera ters 1910 14 1.2 15.3 
Miscellaneous ..... Eeuig sarah stele a ioks erate erate Di eiatare 4.5 sil 4.6 
Total northern or heavy oil...........+. - 1901 317.0 100.6 417.6 
Lower Chinampa (incl. Northern Amatlan 
and Ios Naranjoa), sss sicss ween se ste nie obs 238 11 249 
Casiano-Tepetate ..... Rate eielecdlete eres df (deci eeretie 1910 138 188 
Toteco (Cerro Azul)........... Rieveketedereie siete rere Mane Lame 134 6.1 140.1 
Potrero del Llano and Alazan..........s2e-- - 1910 111 0.6 111.6 
Cerro: 7A ZU le PLOMEL share) cre cevie ote ater dieaela lel crete toe cles 1916 13.3 76.3 779.6 
Alamo Meola Sole eicrce eleters sine tote worerarokovene ferns eer LOLS 41 14.6 81.6 
Tierra Blanca-—Chapapote Nunez.. she iil eve oe ee eal Geb 26 
Miscellancousit 2c cm ow aie erccoten oislaisteesctoleye Ta coireee 22.5 ove 22.7 
Total southern or light oh. ee na ie aatch acer 3 1910 783.8 38.8 822.6 
Total, all Mexico........-eee. ASAT EN A 1,100.8 139.4 1,240.2 


*One naturally wants to know why it was possible for a new industry to spring up 
so suddenly and especially to expand during a long period of political unrest and industrial 
depression. One reason may be found in the geographic location of the oil fields in al- 
most uninhabited jungle and not very distant from -tidewater. Another is suggested 
by the nature of the two principal transportation methods—buried pipe lines and open 
barges, both safer from attack than trains of tank cars. Still another was the need of 
revenue by the ruling party, and this was more easily provided the encouragement and 
protection of an industry which could quickly and profitably dispose of its products even 
though the whole world might be at war. 

+ This percentage is approximated in the iron ore production of the United States 
from Minnesota and Michigan together or in the world steel production by the United 
States, Great Britain and Germany. 

t Includes Zacamiztle, with 11,000,000 barrels, to the end of 1924; Chicincillo, San 
Geronimo and San Miguel, 6,000,000 barrels; Furbero, Tanhujo, etc., hardly 2,500,000 bar- 
rels; Capoacan and the rest of the Isthmian or Tehuantepec pools, not quite 3,000,000 
barrels, besides a few thousands from Chiapas and Tabasco. In addition to the above 
commercial production there was burned about 30,000,000 barrels during the Dos Bacas 
disaster. Total, Tampico-Tuxpam, 1,237 million barrels. 


OZ ON sOfUaU{UOISUOL, 


Gl (ON (P4ctautsuorSUe4, 


Lf OA (OxUPUIEUWOISUOdS, 


‘9 OM PUOAOD 


Transcontinental Comp 


O/ Off JOALUAU/ZUOISUDAL 


‘Ef ON BuU01ED 


a TZ Off [Osu {U0IGUO4L 


ie 


YON sefuauuUorsuoLty 


THE CACALILAO SECTOR OF THE PANUCO FIELD SHOWING EARLY DEVELOP- 
MENT, 1922-23, BY THE STANDARD OF N. J. (TRANSCONTINENTAL) 
AND THE ROYAL DUTCH-SHELL (CORONA) 


From development to January 1, 1926, leading heavy oil pools produced as follows: 
Panuco, proper, 264.2 million barreis; Cacalilao, 158.6; Tulillo-Chapacao, 55.1; Topila, 
15.6. The light oil pools supplied the following quantities: Lower or Southern Chinampa, 
178.6 million barrels; Casiano-Tepetate, 145.7; Toteco-Cerro Azul border, 144.7; Potrero 
del Llano, 100.8; Cerro Azul, 87.6; Southern Amatlan, 69.8; Alamo, 42.6; Tierra Blanca, 
39.5, and Chapapote Nunez, 13.1 million barrels.—Blardone’s special to The Wall Street 
Journal, March 5, 1926. 


—Courtesy of The Lamp. 


236 OILDOM: ITS TREASURES AND TRAGEDIES 


Daily Yield Diminishing During 1925. Salt water was steadily intruding 
in the Cacalilao, Chapacao and Corcovado whence the greater part of the 
oil came in 1925. From the 1925 peak of nearly 400,000 barrels daily 
during the week ended April 18, production had dropped a little below 300,- 
000 barrels daily during the last week of June. The highest rate was 
reached late in 1921 when Toteco swelled the total to 700,000 barrels daily. 
This stupendous figure will stand a long time before approached by the 
peak production of any other foreign land. California alone among the 
states has ever surpassed this record, having reached the daily average of 
872,000 barrels during the weeks ended August 11 and August 18, 1923. 
During the first half of 1925 output aggregated 65 million barrels, two- 
thirds of which was of heavy or Panuco grade.* This was but 5 million 
less than half of the 1924 yield. Nevertheless, as already noted, there 
had more recently occurred a rapid drop of 100,000 barrels in daily rate of 
production, all within ten weeks up to the end of June, 1925. As indicated, 
the decrease is due largely to natural causes, but some of it has been 
ascribed to a conservation policy of the Pan American Petroleum & Trans- 
port Co. (Eastern) which is now controlled by Standard of Indiana. This 
leading producer of Mexican Crude is said to be saving the latter for fu- 
ture use by drawing heavily on the abundant Smackover oil for its Destre- 
han refinery in Louisiana. Although most of the other producers have 
nearly exhausted their known reserves, Mexico must still contain immense 
quantities of unmined oil not only within the owned or leased lands of a 
few companies but also within a huge and promising territory yet untested.} 

Decline Continued in 1926. Between January and December, daily pro- 
duction of Mexican crude oil declined 111,500 bbls—from 306,091 to 194,547 
bbls. The year’s total approximated 90 million bbls.—25 million less than 
in 1925. While output thus fell off over 21 percent, exports of all min- 
eral oil declined about 18 percent—from about 100 million bbls. in 1925 
to 82 million in 1926. The principal destinations in 1926 were: United 
States, over 65’ percent; England, 16.6; Cuba, 6.1; Canada, 2.8, and Porto 
Rico, 2.4. The total value of all petroleum exports diminished 27 percent 
—from 171,164,000 in the first half of 1925 to 125,465,000 pesos in the first 
half of 1926. Decrease is attributed to the drainage of many wells and 
the absence of extensive drilling since the promulgation of the new oil 
laws. Up to November 1, a total of only 291 productive oil wells were 
completed during 1926 (compared with 17,415 in the U. S.). In five years 
the average initial yield of Mexican wells has dropped from over 6,000 
bbls. to about 600 bbls. daily. Meanwhile the dry hole hazard has as- 
cended so that now hardly 1 out of every 8 holes drilled is rated a com- 
mercial producer. 


WHO’S WHO IN MEXICAN PETROLEUM 
Prominent Producers in Mexico. Pan American Petroleum & Trans- 
port Co. (Eastern), through its secondary subsidiaries, the Huasteca Petro- 


* Only a few years ago it was the other way around, so that of the total to the end 
of 1924 there was almost exactly twice as much so-called light oil as of heavy oil pro- 
duced in Mexico. 

t ‘‘Mexico is no longer a menace to the American producer, nor is it likely to become 
so, ihouek there probably will be new fields discovered comparable with those already 
known. This condition has been brought about as largely by the development of facilities 
for increased consumption in the United States as by the decline in Mexican production.” 
—E. DeGolyer in “Transactions of the Am. Inst. of Min. and Met. Engrs.,” 1923. See 

“No Immediate Threat from Foreign Oil,” L. M. Flaming in the Oil and Gas Journal, 
October 30, 1924. Mexico’s output in 1926 approximated half that of Oklahoma, or two- 
fifths that of California. 

~The yearly rate at the beginning of 1927 was hardly 70 million bbls., or less, than 
that of the Gulf Oil Corp., or not quite one-eleventh that of the United States. 


OILDOM: ITS TREASURES AND TRAGEDIES 237 


leum Co., operating mainly in the light oil district, and the Mexican Petro- 
leum Co. (of Calif.), operating around Ebano (both immediate subsidiaries of 
Mexican Petroleum Co. (of Del.) is by far the foremost producer of Mexi- 
can Oil. Standard of Indiana, through its recent purchase of Pan Ameri- 
can, has therefore twice as much Mexican production as Standard of New 
Jersey has through its control of Transcontinental and Penn Mex Fuel Co. 
In the table below the individual companies* are arranged in order of their 
output for 1925, the figures representing millions of barrels. 


Company 1925 Total Company 1925 Total 
Mexican Petroleum ........ 37.37 843.82 National Railways ......... 2.30 3.29 
Dransecontinental 2.3. c.% sas. 20.62 116.83 Aiencice Gillies a7 Walt dtc es mee 1.30 35.91 
Mexican so oeaboard . 4a... 12.66 76.81 Maste COASU. v. mee teu ese soe -99 31.98 
Fup y evlme UTE Wee octk) ficraelaisteic ees < 9.31 97.56 item Lexash Go. ans chia sale .86 42.00 
HOVE Wg S Sh oN 2 tie Se ae 7.97 69.56 Renne-Mexs Fuel!?) i .66 04.0. a5 44.58 
Mexican Magle sie. 630.6 ac 6.54 218.72 stands, Oils: See) tycictn sia ein: 53 24.72 
UO) DAM eae co ie leas wieicre™ (Oc49 97.74 New England Fuel ........ 51 26.72 


MEXICAN 
PETROLEUM 
COMPANY’S 
GUSHER IN 
TIERRA BLANCA, 
1925 


Gushers ‘gauging 
25,000 to over 75,000 
barrels daily are 
still being brought in 
on the former Do- 
heny holdings in the 
Southern fields, where 
the Pan - American 
Company retains 
huge oil reserves. 


—Pan Am. Petrol. & 
Transport Co. 


Eleven companies contributed 86.4 per cent to the total of 140 million 
barrels produced in 1924. The Texas Company and 64 others, each con- 
tributing less than 2: per cent, made up the balance. 

The eleven leading producers in 1925, including The Texas Co. of Mex- 
ico, supplied 92 per cent of the total, 115.7 million barrels. This indicates | 
a drift towards centralization. Standard of Indiana and Standard of New 
Jersey together controlled 51 per cent of the total in 1925. Of 37.6 mil- 
lion barrels of light oil produced in 1925, Pan American furnished 58.3 
per cent, Mexican Eagle 16.4 per cent, and Gulf Oil 7.4 per cent; a total 
of 82.1 per cent for the three. Of 78.1 million barrels of heavy or “Panuco” 
oil, it took five companies to contribute 81.1 per cent: Transcontinental 
(25), Mexican Petroleum (19.8), Mexican Seaboard (15), Royal Dutch 
(11.3), and Sinclair (10), 


_* Of the total (1,350 million barrels) to January 1. 1926, Mexican Petroleum is credited 
with 25.5 per cent; Mexican Eagle, 16.2 per cent; Transcontinental alone, 8.6 per cent, 
or with other Standard of N. J. subsidiaries, about 18 per cent; International or Mexican 
Seaboard (Hammond interests), 5.7 per cent; Gulf Oil (Mellon interests), 7.2 per cent; 
Royal Dutch-Shell alone, 7.2 per cent, or as a group (including Mexican Eagle and Oilfields 
of Mexico), about 24 per cent; Sinclair, 5.2 per cent. 

‘ 


238 OILDOM: ITS TREASURES AND TRAGEDIES 


SECOND WELL, TOTECO- 
CERRO AZUL POOL 


Toteco No. 1, of the Interna- 
tional Petroleum Co., operating 
subsidiary of Mexican Seaboard, 
shortly after it came in. Before 
shut in the roaring gas was 
heard by the author at a dis- 
tance of half a mile. Note the 
valve anchorage and B. E. Hull 
at left; at right, R. C. Holmes, 
now president of The Texas Co., 
1926. Initial yield of this well, 
2,038 feet deep, was 60,000 bar- 
rels; total in 16144 months to 
July 1, 1922, was 10,219,000 bar- 
rels or 7 times that of the dis- 
covery well, Toteco No. 1 of the 
Mexican Gulf Oil Co., which 
came in February 9, 1921, with 
initial of 14,000. The third to 
share in this world record pool 
for daily production (516,000 
bbls., on December 22, 1921) was 
the Huasteca Petroleum _ sub- 
sidiary of Pan American Pet. & 
Transp. Co. Its first well, of 
75,000 bbls. initial, produced 
15,218,000 bbls in 1214 months. 


—Texaco Star 


Shipments Show Decided Decline. During the past eight years from 
80 per cent to more than 95 per cent of the oil produced in Mexico has 
been exported. Tanker shipments keep close pace with production, and 
thus the following table reflects the recent and continued falling off in out- 
put of crude oil.* The figures stand for millions of barrels. To obtain 
the quantities exported, the bunker oil and coastwise (domestic) ship- 
ments have been deducted: | 


Month, 1925 Shipments Exports Month, 1925 Shipments Exports 
JANUALY vices cc pietite oocee tot eOD: 9.91 G20) pt Ca eererat a eames Coch Cre 5 sie cee Oss 8.71 
WeDEUATY ieee ce aioe -- 10.00 9.20 May aise in 2s ere -- 10.10 9.43 
March s..:. cence dees taid ede 10.01 J UNC sacs eee Sree iets . 8.90 7.92 


The marine movement aggregated 61 million barrels in the first half 
of 1925 or 10.5 million less than in the corresponding period of 1924. It 
amounted to 183.8 million in all of 1924 compared with 143 million in all 
of 1923. The maximum movement occurred in 1922 (the year after peak 
production) when 181 million barrels were taken away by tankers. Ex- 
cluding bunker fuel (6.8 million) the shipments of 127 million barrels in 
1924 consisted of 63 per cent crude and 37 per cent topped oil and dis- 
tillates. 

Share of The Leading Shippers. In the accompanying table some note- 
worthy changes appear. The Mexican Petroleum Co. (former Doheny in- 
terest) decreased its exports more than 3.5 million barrels because of 
entering the Mexican gasoline and kerosene market, whereas, before 1924, 
virtually all of its production was sent out of the country. Loss in pro- 
duction of Panuco oil explains the loss of over 6.5 million experienced by 


* Shipments continue declining, in the 31-day month of July, 1925, amounting to only 
8,440,000 barrels. To maintain shipments without greater loss during the past 18 months 
a little oil was moved from stocks which (including crude, fuel and distillates) decreased 
from 22.5 million barrels on January 1, 1924, to nearly 19.7 millions on January 1, 1925. 
Shipments fell off further in 1926, being but 5.4 million bbls. in November compared 
with 6 million in October, and the average of 7 million bbls. per month up to November 
1. As usual, Huasteca or Mexican Petroleum (Pan-Am. P. and T.) led with 36 per cent 
of the combined October and November shipments. 


OILDOM: ITS TREASURES AND TRAGEDIES 239 


“Ta Corona,” the Dutch Shell subsidiary. The greatest proportionate 
drop was that of The Texas Co.—64 per cent of its 1923 shipments. Flush 
production early in the year from heavy oil holdings in Cacalilao enabled 
Gulf Oil Corporation to ship 3.75 million barrels more than in 1923. Simi- 
larly, Mexican Sinclair and Empire Gas and Fuel companies enjoyed good 
gains. The quantities represent millions of barrels. 


Shipping Company 1924 1923 Shipping Company 1924 1923 
Transcontinental ........ sal eeceys 29: Gin mela The sTéxas (Co.. of “MexXinr. <,..< ass 3.1 8.7 
PT UASTO CAM me rsittie + aiccelaiere's.e ec: 6 PO Re oe Wy AL INew )Hngland* Buel? css: os ces ee 2.0 3.6 
Dutch Sell iv evsleterersi¢ cies « saps e L066 > F 20k Mexican | SeCabOarda sc s sees sce © a PY 3.7 
Mexican Eagle (Aguila) ........ 14.6 18.1 Atlanticn Gulig (AS wt) isissis sete +l ih-at 3.2 
Mexican Sinclair .....--.... Ritiors se O.7 Banticos bostonies ocin.e Mie tcdavete avers 9 5 
MIEXTCAT GUL See tere occ creic’s acc ete, « L1G 7.8 UML V ies che ve teh oalees eet orca wee exe 8 a | 
East Coast (S. P. Ry. ie mares See 7.2 Biencen OilGntactie sie caettoe scn tiers Ati 9 
Empire Gas & Fuel.......c+e0. 3.5 2.4 TITLOPOCCH INEM cMyrets tea cs iietn ta ete eilele. & ols AY! 6 


During the first half of 1925 Huasteca (or Pan American Eastern) re- 
sumed its leadership with exports of 20.3 millions, or at the annual rate of 
40.6 millions. This marked a gain of 5.1 millions over the first half of 
1924. Standard of New Jersey similarly increased 1 million and Mexican 
Eagle almost 3 million barrels. The other important companies registered 
losses ranging from 1 to 4.2 millions, the maximum by Mexican Gulf, dur- 
ing the first half of 1925.* 


—The Texaco Star. 


BARGING CREW AND SUPPLIES ACROSS THE PANUCO 


This shows how low and swampy most of the land appears | in the Panuco field through 
which this navigable stream meanders leisurely ‘‘a la manana.’ 
r 


TAMPICO—TREASURE TOWN OF MEXICO 


World’s Most Exclusive Oil Port. Tampico is the queen of seaports 
in the southern republic. Petroleum has enthroned this Cinderella of Mex- 
ican cities.* In less than a quarter century it has become, moreover, the 
metropolis of oildom outside of the United States. Los Angeles harbor 


* At the beginning of 1927, Huasteca was producing 58 to 60 per cent of the light 
Mexican oil and 33 to 34 per cent of the heavy, shipping around 40 per cent of the total 
exported. Next in production (and shipments) was Standard of N. J.; third, Mexican 
Seaboard; fourth, Royal Dutch-Shell; fifth, Mexican Eagle; sixth, Gulf Oil. 


240 OILDOM: ITS TREASURES AND TRAGEDIES 


—Photo by author, 1921. 


TAMPICO HARBOR, SHOWING STANDARD .OIL TANKER (LIGHT) AND BARGES 
(LOADED WITH OIL BROUGHT FROM THE PANUCO FIELD 
FOR TRANS-SHIPMENT) 


alone of all the world’s ports has ever surpassed Tampico in tonnage of 
oil shipments. In value it does not show up so well since the big bulk of 
the liquid is shipped unrefined—63 per cent as crude and most of the rest 
as topped erude in 1924, 


Due to favorable railway rates from the interior, placing her on a par 
with Vera Cruz, the second seaport, and due to her strategic situation, 
half way between Matamoras (opposite Brownsville, Texas) and Vera 
Cruz, Tampico now dominates the export trade with the United States— 
to the extent of 50 per cent in 1923 and 638.5 per cent in 1924. The actual 
values were $70,700,000 in 1923 and $106,000,000 in 1924. The exports in- 
cluded, besides pertoleum, ixtle fibre, sisal fibre, hides and chicle. The 
imports, worth not nearly so much as the exports,’ included immense 
quantities of pipes and fittings, oil field and mining machinery, autos and 
trucks, as well as minor amounts of general merchandise. The importance . 
of Tampico to the United States is emphasized by the fact that three-~ 
fourths of Mexico’s foreign commerce is carried on with out country. 


Rivals Arose to Relieve Tampico’s Congestion. In the matter of oil 
shipments Tampico was obliged to share rather heavily with “mushroom’’ 
competitors during a decade.f From 1912 to 1922 not quite 35 per cent of 
Mexico’s marine movement of oil was out of Tuxpam and Port Lobos, the 


* The history of Tampico begins in 1823. It was a straggling village of humble, 
scattered huts, without any commercial importance. A more ideal townsite could not 
have been found on the Gulf coast. Situated only six miles from the sea, and on the 
higher north bank of the Panuco just below its junction with the Tamesi, Tampico is in 
sight of the broad bosom of the Gulf and gets the benefit of its health-giving breezes. 
The rolling tract of land on which it is located enjoys natural drainage. * * * The Midas 
touch of oil transformed Tampico from a quiet, leisurely little town into a noisy, bustling 
burg of over 100,000 inhabitants.—The Texaco. Star, March, 1921. 


: j * * * The phenomenal development of oil production taxed the T. harbor beyond 
its capacity. As the industry moved southward, Tuxpam became the logical shipping 
point ; but the lack of a harbor for ships of size obliged the operators to install sub- 
marine pipe lines to loading berths out in the Gulf where tankers could load to capacity. 
In 1918, The Texas Co. established a terminal at Agua Dulce opposite Lobos Island, 70 
miles south of Tampico. At the end of August, 1925, there was a shut-down, the last 
of several sea-loading terminals along the 18-mile stretch of the Gulf Coast from Tecomate 
to Agua Dulce in the State of Vera Cruz. These cost about $34,000,000 and had a salvage 
value of $4,000,000 when abandoned. At the height of production in 1921, from the 
Golden Lane,” as the light oil area was known, and when construction was at its height, 
4,250 men were employed at the seven sea-loading stations and topping plants. At times 
there were as many as 48 tankers either loading at the end of sea lines or awaiting berths. 
—Petroleum World, August. 1925. 


OILDOM: ITS TREASURES AND TRAGEDIES 241 


fluctuations being from 21 to 42 per cent. The 100 million barrels of pe- 
troleum which passed out of the Panuco river in 1921 made 57.5 per cent 
of the total shipments by water that year, the banner year in Mexico’s 
production. Tampico bettered her share in 1922 when the 122.7 million 
barrels constituted 66.2 per cent of the total. Her first tanker cargo of 
crude left on May 20, 1911, and the total for that year amounted to less 
than 900,000 barrels. Her share that year was about 90 per cent, and 
with the abandonment of Port Lobos, beginning in 1924, Tampico is again 
more firmly seated in the saddle with a percentage of 97 for the half- 
year ended June 30, 1925. The topping plants at Port Lobos have also 
been shut down. Because of the failing quality of Mexican crude even 
some of the refineries at Tampico have closed. On January 1, 1923, seven 
plants along the Panuco could refine 300,000 barrels daily—85 per cent of 
the national capacity. This seaport, considered as a single city and not 
as a district like Los Angeles, has actually been supreme throughout the 
world in capacity for partial refining, that is, topping.t 

Uncle Sam The Biggest Buyer of Mexican Oil. Owing to its popularity 
as fuel oil Mexican petroleum during the past ten years has penetrated to 
many foreign lands, as many as 382 in 1922. The more important desti- 
nations for the vessel shipments in 1924 are indicated in the following 
table: 


Destination Mill’n Bbls. Percent Destination Mill’n Bbls. Percent , 
of exports 1923 1924 1924 of exports 1923 1924 1924 
Liniteds states vce... 5 96.5 89.2 73.0 @Ganadau cteocnsc nes 2.4 1? 1.5 
United Kingdom ..... Wa 8.4 6.8 Panamae ees wrote. 1-2 Rak 0.9 
Cuba & West Indies... 6.8 7.6 6.2 Central America ..... 1.0 0.8 0.7 
SouthmAmerncad.as oc. ce 6.7 5.5 Alia OLNersiac chon ake ctne 123 0.8 0.7 
Continental Europe.... 4.2 5.4 4.4 ESN amreN ees 
POLL io. meee ie LAS tou dtelss 100. 


It will be noted that the United States generally takes three times as 
much Mexican oil as all the other countries combined. France, Italy and 
Germany were the leading Continental buyers in 1923, the first taking just 
one-tenth as much as the United Kingdom. In South America, Argentina 
in the same year bought 3.5 million barrels or almost as much as Brazil, 
Chili and Uruguay together. Total Latin American shipments of Mexican 
oil amounted to 16.2 million barrels in 1923 and the same in 1924. In the 
first half of 1925, the United States was the destination of 77 per cent 
of the shipments abroad and prosperous Cuba of 7.5 per cent or more than 
half again as much as the United Kingdom. In computing percentages 
both bunker oil and coastwise shipments to other Mexican ports were 
deducted from the total tanker shipments—133.8 million in 1924 and 143 
million in 1928. 


t According to The Wall Street Journal, which stated that the Corona refinery of 
60,000 barrels capacity was closed and that the Transcontinental (20,000 barrels) was dis- 
mantling, presumably late in 1923. 

According to U. S. Commerce Reports, November 16, 1925, there are 19 refineries in 
Mexico, of which 8 are topping plants with capacity of 268,042 bbls daily, and 6 are com- 
plete plants of 192,285 bbls. capacity; total, 461,390 bbls. There is also one plant pre- 
paring gasoline exclusively, and another producing asphalt alone. The total refining ca- 
pacity is about 50 per cent in excess of current yield of crude. Of 140 million barrels 
produced in 1924, hardly 67.5 million was refined. Of the products, 64 per cent was fuel 
oil; 20.7 per cent, crude and refined gasoline; 3.1 per cent kerosene; 1.4 per cent asp halt; 
0.28 per cent lubricants. 

According to U. S. Commerce Reports, February 8, 1926, exports of crude petroleum 
and products in 1925 approximated 963 million barrels out of 114.8 million produced hav- 
ing a value of about $145,000,000 U. S. currency. Of the domestic production about 11:6 
per cent was consumed in Mexico in addition to 1.8 million barrels of products imported, 
making the total consumption a little over 15 million barrels or 42 gallons per capita. 


242 OILDOM: ITS TREASURES AND TRAGEDIES 


Meaning of Mexican Oil to Americans. Elsewhere it has been re- 
marked what a factor Mexican fuel oil proved in winning the war. As 
bunker fuel in direct competition with coal it may remain the principal 
utilization because of its gravity.* The United States, to the end of 1925, 
has received from the southern neighbor somewhat over 825. million bar- 
rels of petroleum having a monetary value of between $500,000,000 and 
$600,000,000.+ Ultimately and in various ways the derived products and 
the directly consumed crude were worth a great deal more to us Ameri- 
eans. For instance, our motorists must have indirectly appreciated the 
addition to their supplies of about 75 million barrels or nearly 3,200 mil- 
lion gallons of gasoline. Not only that, but without doubt the imports 
from which this motor fuel was refined~did depress the price of the do- 
mestic product. No wonder, then, that Mexican oil proved obnoxious par- 
ticularly to our Mid-Continent producers who once and again chorused a 
eall for an import duty on foreign petroleum.t It appears that the high 
tide in the output of the Tampico district came concurrently with a period 
of enormous expansion in our own production. Low prices were bad 
enough for the oil business of the United States, but the worst feature of 
the over-production in North America was the encouragement of economic 
waste of a precious product. Altogether too much good fuel oil has been 
burned inefficiently beneath boilers instead of running Diesel and semi- 
Diesel engines. : 


—From photo by the author. 
PAN-AMERICAN TANKER AT HUASTECA PETROLEUM COMPANY’S TERMINAL 


This shows part of the loading pier on the south side of the Panuco, opposite Tampico, 
or about five miles from the gulf. Farther south is the large tank farm. 


Significance to Our Southern Neighbor. While the world abroad has 
bought and burned nearly nine-tenths of all the oil produced*in Mexico, 
largely as fuel oil in place of coal, this combustible has signified a great 
deal more to the Republic than is apparent at first sight. Used originally 


*The Oil Trade, July, 1925, reports that Pan. American (Eastern) will install ex- 
tensive cracking facilities in Mexico for getting a high gasoline recovery from its large 
production of low-gravity oil. ey : ‘ ; 

f In the six years, 1919-1924, 608 million barrels worth almost $400,000,000 and in- 
ereasing in value each year though decreasing in. quantity. 

¢t “No Immediate Threat from Foreign Oil—Menace of Mexico’s Output Becoming More 
Remote” is the title of L. M. Fanning’s article in The Oil and.Gas Journal, October 30, 
1924. See also similar contributions by Chas. E.. Bowles, now Assistant Secretary Mid- 


Continent Oil & Gas Assn., Tulsa: 


OILDOM: ITS TREASURES AND TRAGEDIES 243 


as fuel on her railways, Mexico’s oil early cut down the nation’s coal bill.* 
As a source of artificial asphalt it may be credited with paving several 
Mexican cities. In mining it has materially reduced the operating costs. 
In both volume and value, petroleum has ranked first among Mexico’s 
minerals for seven or eight years. It is by far the foremost export, mak- 
ing up more than one-fourth of the total (increasing from 28 per cent of 
the value in 19238 to 35 per cent in 1924; the percentage being even greater 
in tonnage and in volume). It has brought $600,000,000 foreign capital 
into the country and has provided employment to many peons. The oil 
industry has helped to create a higher standard of living, having the habit 
of paying good and steady wages.+ Tampico, almost entirely dependent 
on petroleum, has risen from a hamlet of huts to a modern municipality of 
more than 100,000 inhabitants and with handsome suburban “colonies” 
occupied by oil men and their families. It has become, through oil alone, 
the leading seaport of the Republic. Though suffering itself from the 
inroads of revolutionists and brigands, the Mexican petroleum industry has 
promoted stability in Government through’ the payment of liberal taxes. 
Its major development came at a critical time when enforced idleness in 
other industries, notably in mining, cut off sources of Federal revenue. 


tall 


MEXICO’S NIGHTMARE OF NATIONALIZATION 


True Cause of Curtailment in Output of Crude. As in California, the 
oil deposits in Mexico are limited in area and extremely localized. In 
order to find new ones it is necessary to drill many dry holes. This risk 
has lately increased to more than 60 percent or three times the dry-hole 
hazard in the United States. The average initial and the average settled 
production have also slumped. Thus the costs of discovery and of pro- 
ducing have climbed to a high level. The production rate, however, would 
not have fallen off so fast, 50 percent in five years, if the Mexican Gov- 
ernment had encouraged the spending of greater sums in finding and de- 
veloping. The experience of the Transcontinental, subsidiary of the Stand- 
ard Oil Co. of N. J., is a case in point. It desired to explore for new 
reserves but could not because the government had failed to adopt a fav- 


* Of more than 12,000,000 barrels of oil kept for domestic consumption (per capits 
of about four-fifths barrels or 32 gallons) during 1924, about 6,000,000 went to interior 
markets and the rest to railways and for field use. This is equivalent to about 3,500,000 
tons of coal, which at $8 a ton would have a value in Mexico of $28,000,000 or more than 
56,000,000 pesos. 


t Aside from the revolutionary interruption in 1915, the petroleum industry has 
constituted the only consistently active and reasonably prosperous basic industry (for 
many years), although the year 1921 and the first half of 1922 saw many wide (and) 
variations in Mexican oil, according to the Latin American Division of the U. S. Dept. 
of Com. (Supplement to Commerce Reports, No. 20, 1922). During the oil boom, and up 
to early 1921, industrial and personal receipts had been on a very liberal scale. During 
the early Summer of 1921, a surplus ef fuel-oil stocks following the discovery of the great 
Toteco pool in February (1921) and of the Southern Amatlan-Zacamixtle in October 
(1920), and following also a decrease in demand owing to a general depression in the 
world markets, forced the price from a range of 40 to 50 cents a barrel down to a mini- 
mum of 10 cents a barrel. All construction programs were stopped, and contracting com- 
panies were forced out of business. Later came the great fire at Amatlan, the salt-water 
invasion of the wells, and controversies with the Government over taxes which caused 
further Suspensions. During the period of low prices, more than 20,000 Mexican laborers 
in the oil fields were laid off and compelled to leave the district on account of high living 
costs. All this reacted on the commercial interests. The purchasing power diminished; 
orders for new goods were withdrawn; stocks ran low, and only small supplies of neces- 
sary staples were imported. Imports from the United States dropped from $222,000,000 
in 1921 (mostly received in the first half) to hardly $110,000,000 in 1922. 


244 OILDOM: ITS TREASURES AND TRAGEDIES 


orable petroleum law permitting investments for continued development.* 

Navigating Towards Nationalization. During the last few years the 
Federal Government has drilled on its railway right-of-way through pro- 
ducing oil land and much nearer private property lines than is usually 
permitted in the United States. Thus the government has come into 
competition with the Mexican oil industry from which it has collected pro- 
duction and export taxes totaling 43 million dollars (U. S.)-in 1922, 30.5 
million in 1923, 27.5 million in 1924 and 21 million in 1925. Since the 
adoption in 1917 of the present constitution the government has striven 
to nationalize the subsoil. In 1918, the producers, supported by their home 
governments, successfully resisted the government’s efforts to exact rentals 
and royalties on top of those paid to the private owners additional to the 
increasing taxes and tolls then being variously obtained. 


Confiscation Threatened Under New Law. Late in 1925, an oil law 
was enacted, effective January 1, 1927. It affirmed the nation’s ownership 
of the subsurface oil and provided for government concessions to confirm 
rights procured up to May 1, 1917.’ The new law accords with the famous 
Article 27 of the Carranza Constitution in denying the right of foreign 
companies to acquire concessions. To the many important producers who 
do not hold Mexican charters the new law has proven particularly em- 
barrassing, none the less because the form of confirmation was not an- 
nounced ‘until December 26, 1926, although they were expected to apply 
before December 31, 1926, under threat of confiscation of the land which 
they had paid for. 


Mexican Court Justice versus Intervention. Apparently this dispute 
between the Mexican Government and American and foreign oil companies 
has settled down to a court fight. Mexico’s Foreign Minister has actually 
invited them to seek redress in Mexican courts. But the operators have. 
misgivings in view of the personnel standard of the Supreme Court ¢ and 
of the miscarriage and procrastination of justice in the case of the late 
Mrs. Evans whose home was taken from her after the murder of her 
British husband. The Texas Co.’s “amparo” case is another illustration. 
The fifth favorable decision was nullified with the passage of the new law 
in 1925. The foreign operators do not desire arbitration since this proce- 
dure might recognize the right to confiscate their properties. The United 
States Government has intervened and even “invaded”’ at times when lesser 
values or principles have been involved.{ 


* All drilling in 1926, as previously, was done on land from the surface owners of which 
the subsoil rights had been acquired under laws in force before the Carranza Constitution 
went into effect, May 1, 1917. These were similar to those of the United States and all 
operations of the Transcontinental were performed under contracts with the owners who 
received rentals and royalties at rates approximating those paid here. See Oil & Gas 
Journal, March 8, 1927; also, The Lamp, February and October, 1926. 

* No one is qualified for a judge of this court if he has been convicted of any offense 
punishable with more than one year’s imprisonment. See Wall St. Jrnl., Jan.-Feb., 1927. 

~ See Marcosson in The Saturday Evening Post, March 5, 1927, also the Public Ledger, 
March 1, 1927. Following are facts from American records: Of Mexico’s 90 million bbls. 
of oil produced in 1926 about 76 percent was by the 22 concerns listed by President Calles 
as recalcitrant. More than 148,000 Americans are stockholders in these companies and 
their investments have been estimated at $350,000,000 to $500,000,000. ‘They declined to 
give up legal titles obtained prior to 1917 for revocable concessions. The remaining 24 
percent of Mexico’s production represénts some companies which had applied for concessions, 

Asked The Lamp in the fall of 1926: ‘‘Now the story is told, has Mexico reason to 
regret the entrance of the oil companies with their hundreds of millions for development, 
operations and taxes? When it is realized that out of every $3 received for Mexican oil, 
$2 stayed in the country ($1 to Mexican labor and $1 to tax’ collectors), the talk of 
exploitation of a helpless nation by foreign capital can be valued at its real worth.” See 
also Los Angeles Times, Dec. 7, 1926, and U. S. Commerce Reports, Apr. 18, 1927. 


OILDOM: ITS TREASURES AND TRAGEDIES 245 


CHAPTER XI—GOVERNMENTAL RELATIONS 


OUR FEDERAL GOVERNMENT THE GREATEST OIL LAND OWNER, 
LESSOR AND CONSUMER OF PETROLEUM PRODUCTS 


“We have had many attempts at regulation of industrial activity by law. Some of it 
proceeded on the theory that if those who enjoy material prosperity used it for the 
wrong purpose, such prosperity should be eliminated and abolished. This is as sound 
as it would be to abolish writing to prevent forgery. We need to keep in mind 
forever that guilt is personal; let us not condemn the instrument but the evil doer.”— 
CALVIN COOLIDGE. 


“We could not ignore the Government as a real factor, or, because of its interest 
as a consumer, merge it with others in that category, for it is undeniable that the 
policies of Government, state and national, are important factors in our weal or woe, 
and the success and perpetuity of the Government itself depends largely upon the course 
of its industries—Amos L. BEaty, Chairman of the Board, The Texas Company. 


Manifold Federal Relations. More varied and extensive relations to the 
vil industry are maintained by the American Government than by any 
other government, such as that of either Mexico or Russia, where tragic 
nationalization* has been practiced in diverse degrees. The administra- 
tions in these two countries are primarily concerned with the government 
income that may be procured and not with the true prosperity of any pri- 
vate petroleum industry. Considering that the big bulk of the present 
production in the United States is derived from lands once part of the 
public domain and that our Government cooperates in finding oil and in 
avoiding wastes of all kinds that are detrimental to the legitimate indus- 
try, it may be correctly claimed that our Government contributes more 
than it takes. The Federal Government, that is, the people of the United 
States, is the greatest owner of oil lands, at least within our own national 
boundaries; it. is the leading lessor, receiving royalties from oil, gas and 
natural gasoline in the fiscal year ended June 30, 1925, exceeding $15,- 
000,000; it acts as an advisory geologist and engineer; it is preeminent as 
a petroleum economist; it not only supervises the production from Indian 
lands but through the Supreme Court has directly operated oil wells on 
lands whose ownership has been in dispute (Red River boundary between 
Oklahoma and Texas); it is the world’s biggest buyer and consumer of 
petroleum products; it is the foremost publisher of literature on oil and 
gas, and it is outranked by the republic to the south alone as the champion 
collector of taxes and tolls on the output and traffic in petroleum (see 
Panama Canal and page 19; also Treasury Dept.).** 


Reasonable Regulations Good for the Industry.+ There are a few places 
where uniform regulations, worked out by those familiar with the subjects, 
would be salutary. One of these is where the producer in his greed com- 
mits waste at the well or in storage. We need rules of conduct and'an 


*Paralleling every argument against Government operations is one insistent note. 
That is the preservation of the vital initiative and enterprise of our people. Govern- 
ment can correct abuse without entry into business. If it can not, then democracy 
shall have failed—Herpert Hoover, quoted in Oil Bulletin, January, 1925. 

** Publications of the Department of Labor, the Federal Trade Commission and the 
Interstate Commerce Commission have been quoted elsewhere to indicate their relations to 
oildom. See page 171 re the Government tanker fleet which made 12 percent of all 
American tanker tonnage in 1924; see also page 255 re retained tankers of about 400,000 
tons capacity on January 30, 1926. 

t From address of Amos L. Beaty before the Ft. Worth meeting A. P. I., December, 1924. 


246 OILDOM: ITS TREASURES AND TRAGEDIES 


umpire of the game at these points. There is nothing radical or alarming 
in the idea. Some of the oil producing states have taken notice of waste- 
ful practices and have acted to prevent them. In many cases the enact- 
ments have been crude and sometimes unworkable. This has been due to 
the fact that those skilled in the business did not take the lead or point 
the way. Town-lot drilling and line crowding are things to fret about. 

Doubtless something on that score might be done. It is an outrageous 
species of competition, worse than selling below cost, to force one to drill 
a well to each acre where a well to ten acres would do. Among serious 
operators there is no difficulty on account of waste of oil or overdrilling. 
They usually rise to the occasion and do what is right; it is the reckless 
operator, usually a stock selling promoter, that needs curbing. 


Activities that Benefit Both Business and Consumer. What is truly good 
for the Government is indirectly, as a rule, also beneficial to both producer 
and consumer, as detailed later on. Inquisitorial hearings, however, in- 
variably irritate the honest operators and rarely prove of any permanent 
value to the public. They often interfere with proper cooperation for the 
common welfare as in the conservatism of capital and the prolongation of 
natural resources. The oil industry as a whole resents particularly any 
uncalled-for Congressional attacks and the interference of the Federal 
Trade Commission.* On the other hand + the industry welcomes the valu- 
able services of the Geological Survey, the Bureau of Mines, the Bureau 
of Standards and the Bureau of Foreign and Domestic Commerce. Their 
activities advance the interests of both producer and consumer since they 
consist of research in the field and laboratory; the assembly, study and 
distribution of useful statistics; the promotion of commerce in mineral oil; 
and the investigation of and advising on methods and equipment that may 
increase recovery in field and refinery and often lower costs. The legiti- 
mate industry and the public are pleased with the efforts of the Justice 
and Post Office Departments to discourage dishonest promotions. The in- 
dustry especially is appreciative of the purpose, spirit and operation of 
the Federal Conservation Board.t 


What Congress Has Accomplished: The first session of the 69th Con- 
gress, ended last July (1926), passed its major measure for the benefit of 
the oil business, but this was vetoed by President Coolidge. It would have 
solved the vexed problem of oil leases on Executive-order Indian reserva- 
tions. Had the bill become law it would have accomplished five purposes: 
(1) Permitted exploration for oil and gas on reservations (of about 23,- 
000,000 acres) not created by act of Congress; (2) given to the Indians all 
of the oil and gas royalties; (8) authorized the states to tax the produc- 
tion of oil and gas on such reservations; (4) extended relief to permittees 
and applicants who have in good faith sought to discover oil and gas under 
the general leasing act of February 25, 1920; (5) removed the necessity 

for further litigation in the courts concerning the leases under which, while 
they were in effect, valuable discoveries of very light oil were made on the 


*See The Texaco Star, May, 1924. 

t “Cooperation of the Federal Government in Discovery and Production of Petroleum,” 
by E. C. Finney, before A. P. I. meeting, Chicago, December, 1921. 

~The Government furthermore creates investments opportunities through the leasing 
of public oil.lands. See Magazine of Wall Street. 


OILDOM: ITS TREASURES AND TRAGEDIES 247 


Navajo Reservation in New Mexico. The only bill enacted for the good 
of the oil industry was that of Senator Ralph Cameron, of Arizona. Under 
its terms any oil or gas prospecting permit issued under the act of 1920, 
or extended under the act of 1922, can be further extended for two more 
years by the Secretary of the Interior under certain conditions.§ 


How Oil Has Helped the Government. Elsewhere, at the end of Chap- 
ter XII, it has been pointed out how the petroleum industry, through its 
leaders, not only refrained from profiteering during the war but also con- 
tributed the great essential in the way of mechanical power which more 
than man power procured the victory. It has contributed to the economy 
and efficiency in the operations of the National Defense on land and sea 
and in air and water. Without automobiles, peace-time government would 
be slower. Gasoline has greatly simplified the transmission of documents. 
Airplanes cross the continent under the auspices of the Post Office De- 


OUR GOVERNMENT 
PROGRESSIVE 


Uncle Sam’s mail 
service by airplane is 
proving a valuable 
aid to American 
business. The saving: 
in time means quicker 
turn-over of capital 
and gains in other 
ways. 


Thus the Post Of- 
fice Department is a 
consumer of aviation 
gasoline as well as 
motor fuel for mail 
‘trucks. Army and 
Navy planes likewise 
consume light fuel.. 


—Standard Oil Bulletin. 


partment in hours instead of days. Motor cars make it possible for mes- 
sengers to make The White House and return to The Hill in less than 15 
minutes.* Oil has contributed heavily to the financial support of both 
State and Federal governments, and indirectly, through the gasoline tax 
in about 45 states, has built paved roads and permanent bridges (see bes 
low and Chapter XIII). Oil executives have assisted in introducing better 
business methods in Government administration, notably in establishing 
and building up the budget system. 

Treasured Income versus Tragic but Trivial Losses. Not ignoring such 
minor episodes as the escape of the elusive liquid from a naval oil reserve 
before its partial and delayed capturing,} it may be conservatively said that 
treasures derived by the Federal Government from oil and the oil indus- 
try measure more than ten times the tragedies entailed. Looking at the 


§ Abstract of article by Geo. H. Manning in The Oil Trade, August, 1906. See also 
page 21, The Oil and Gas Journal, April 24, 1924, article by L. M. Fanning. 

*See The Lamp, April, 1922, inside back cover. 

j Referring to E. L. Doheny’s meritorious enterprise in drilling wells in the Elk 
Hills district for the Navy Department and in constructing essential storage in the 
Mid-Pacific. See editorial page, Oil City Derrick, May 1, 1925. Court evidence apparently 
convinced the jury at Washington just before Christmas, 1926, that Mr. Doheny’s motives 
were primarily patriotic. 


248 OILDOM: ITS TREASURES AND TRAGEDIES 


matter from the mere money side, the Federal Government. has found the 
petroleum branch of the mineral industry the most profitable or “plum 
bearing.” Government income from taxes on the net earnings and excess 
profits of oil companies was almost $40,000,000 in 1919 (page 19) or be- 
fore the leasing law went into effect. Such income tax collected by the 
Bureau of Internal Revenue amounted to $94,500,000 in 1920, dropping 
below $22,700,000 in the dolorous year 1923 when the oil industry was in 
distress despite the removal of the excess-profits tax. The Federal tax 
totaled $36,400,000 in 1924, according to the latest published report of 
David H. Blair, Commissioner of Internal Revenue.t Federal taxes and 
royalties combined for the year 1925 may be estimated at a sum consider- 
ably greater than $50,000,000. Royalties alone approximated $15,000,000, 
but only 10 percent thereof reverted to the U. S. Treasury after allowmg 
37% percent to the states within which the oil and gas were produced and 
after diverting 52% percent to the reclamation fund for use in western 
states. Wyoming, with its Salt Creek field owned almost entirely by 
Uncle Sam, received 86.2 percent of the 837% percent paid back in the fiscal 
year ended June 30, 1925; California, containing Naval Reserves Nos. 1 
and 2, received 10.8 percent; Montana, Colorado and Utah received most 
of the remaining amount.§ The Government gathers no duties on the im- 
portation of petroleum although Mid-Continent producers have clamored 
for a protective tariff on Mexican crude oil; but considerable revenue 
(over 40 percent of the total in one year) has been received as tolls on the 
tanker traffic through the Panama Canal. 


DEPARTMENT OF COMMERCE AND BUREAU OF MINES 

Commerce Contact with Mineral Matters. Since a mining engineer be- 
came Secretary of Commerce, Government business pertaining to mineral 
resources, the mining industry and trade in metals and minerals as well 
‘as their utilization gradually gravitated towards the Department of Com- 
merce as a great clearing house. Before the transfer of the Bureau of 
Mines on July 1, 1925, the Interior Department probably. had the most 
varied relations with the mineral industry in general and the petroleum 
branch in particular. It was likely for this reason that Secretary Work, 
in December, 1924, had been made chairman of the Oil Conservation Board. 
Today, through the Bureau of Mines, the Bureau of Standards and the 
Bureau of Foreign and Domestic Commerce, Mr. Hoover’s department is 
able to help the operating oil industry and mining in general along more 
lines of real usefulness than any other Federal department. 

Activities of the Minerals Division. This division of the Bureau of For- 
eign and Domestic Commerce was organized in July, 1924, to coordinate 
and make more effective the work carried on before by the Petroleum Di- 


t See “Statistics of Income,” edited by Edward White, November 1, 1926. 

.§ See “Government Waxed Fat from Investments of Oil Men,’ The Oil and Gas 
Journal, December 14, 1922; “State Control of Public Lands Deemed Unwise,” Christian 
Science Monitor, September 20, 1926. Crude oil production from Federal lands increased 
from 42 million barrels (9 percent of the total) to nearly 90 million barrels (about 12 
percent of the Nation’s total) in 1925. Of the latter quantity, 12 million was derived 
from Naval reserves, 29.5 million from the Public Domain, and 48 million from Indian 
lands. Read opening address of Chairman Work of the Federal Oil Conservation Board, 
February, 1926, hearing attended by the author. 


OILDOM: ITS TREASURES AND TRAGEDIES 249 


vision* and the Minerals Section of the Iron and Steel Division. Its func- 
tions include the collection and dissemination to Americans of information 
on foreign markets for petroleum and other mineral products, as well as 
data relating to foreign development and production of the various min- 
erals and non-ferrous metals and to current surveys of foreign and do- 
mestic mineral, metal and petroleum activities. The Petroleum Section 
carries on the assistance rendered the American oil industry by the former 
Petroleum Division in the marketing of petroleum products abroad and in 
supplying facts about foreign petroleum development, production and leg- 
islation. As a result of one notice published in Commerce Reports} under 
“Trade Opportunities,’ one American oil company obtained an annual ex- 
port business of $250,000. Supplements to this weekly, known as “Trade 
Information Bulletins’ are issued from time to time and deal with the 
petroleum trade and industry of a single foreign country. Thus “T. I. 
Bulletin No. 407” was entitled “British Petroleum Trade in 1925” and 
contained the usual Foreword by Julius Klein, Director of the Bureau of 
Foreign and Domestic Commerce. 


BARTLESVILLE (OKLA.) PETROLEUM STATION OF THE BUREAU OF MINES 


Its value to the oil industry is twofold—(1) The furnishing of technical information ; 
(2) the training of men for executives, engineers and technologists. Among the many 
“graduates”? from the research staff, now active in the industry, may be mentioned A. W. 
Ambrose, E. P. Campbell, F. A. Edson, H. C. George, H. H. Hill, J. O. Lewis, F. X. Schwar- 
zenbeck, E. W. Wagy and L. D. Wyant. The superintendents have been successively, Messrs. 
Lewis, W. P. Dykema, Ambrose, Hill, T. E. Swigert, M. J. Kirwan, R. A. Cattett, W. W. 
Scott and E. P. Campbell whom N. A. C. Smith succeeded in April, 1926. For further de- 
tails and view of the research staff see ‘““‘The Oil and Gas Journal,” January 6, 1927. 


* This division was worked up in 1923 by Henry C. Morris who had served as 
confidential assistant to the Director of the Bureau of Mines during and after the War. 
See “Com. Bur. of Real Use to the Am. Oil Industry,’”’ by Chas. E. Kern in The Oil 
and Gas Journal, September 6,. 1923; also issue to January 29, 1925: “Promoting 
Petroleum ‘Trade Abroad,’ which refers to Guy C. Riddell as the first chief of the 
reorganized Mines Division. Since July 1, 1926, Homer S. Fox has been acting chief. 
ft One of the most helpful of all Government periodicals; issued weekly, 64 pages; 
subscription only $4 .through Superintendent of Documents, Washington, D. C. 


250 OILDOM: ITS TREASURES AND TRAGEDIES. 


Activities of the Bureau of Mines. Unquestionably, up to the time of 
the transfer of the public land mineral leasing unit to the Geological Sur- 
vey, the Bureau of Mines had carried on the most comprehensive oil work. 
As indicated in the index as well as below, its duties are still vast and 
varied. It compiles and issues monthly statistics on crude oil production, 
storage and transportation, and apparent consumption in the United 
States; also on refinery operations. It publishes bulletins based upon its 
researches covering the entire field of petroleum, natural gas and oil shale 
technology in relation to production, transportation, refining, storage and 
chemistry. Its most signal service has pertained to the conservation of 
petroleum (page 40 and index) of which it has been relieved only in part 
by the Survey. Viewed broadly, the Bureau of Mines and the Bureau of 
Standards (page 101) together may be regarded as a great board of con- 
sulting engineers which furnishes free but expert advice and information 
on oil and other topics for the good of the Government, the industries, the 
present consumers, and the ordinarily ignored posterity.* 

Contributions to the Conservation of Capital. The Bureau of Mines has 
not only prescribed and practiced immensely helpful measures for the con- 
servation of both mined and unmined petroleum but it has.experimented 
extensively in various ways to prevent vast financial losses. It has shown 
how the shutting off of corrosive waters in sands above the oil-bearing ones 
may not only lengthen the life of well equipment but will save the oil it- 
self from salt water invasion. In Kansas alone the losses from under- 
ground corrosion in the producing fields are believed to exceed $3,000,000 

yearly.+ In many fields the deposition of wax from the crude oil entering | 
a well is a problem of major importance. In one Rocky Mountain pool the 
cost of removing paraffin from rods and tubing in 1924 was more than 
$500,000. Laboratory studies indicate that removal methods cheaper and 
quicker than those in use are possible (see also index). The use of elec- 
trically driven equipment has been recommended for the reduction of costs, 
and the standardization of oil field equipment has been advocated in co- 
operation with the Bureau of Standards. 

Committee Recommendations. Several changes in the Bureau of Mines 
work was recommended early in 1926 by Mr. Hoover’s committee.t It 
stated that the work of the Petroleum Division has been helpful and of 
direct value to the oil industry. It has included: (1) The collection and 


* For a summary of the annual report of the Bureau of Mines Director to the Secre- 
tary of the Interior covering the period before its separation therefrom, see Oil and Gas 
Journal, December 17, 1925. The present director is Scott Turner, experienced mining 
engineer. : 3 

j Bulletin 233, 1925, “Protection of Oil and Gas Field Equipment against Corrosion,” 
by R. Van A. Mills; price, 35 cents; Superintendent of Documents, Washington. 
Among other very practical publications of the Bureau of Mines may be mentioned 
these other bulletins: No. 148, ‘Methods for Increasing Recovery from Oil Sands,” J. 
O. Lewis, 1917; No. 163, “Method of Shutting Off Water in Oil and Gas Wells,” F. 
B. Tough, 1918; No. 182, “Casing Troubles and Fishing Methods,” Thos. Curtin, 1920; 
No. 192, “Carbon Black,” R. O. Neal and G. St. J. Perrot, 1922; No. 194, “Principles 
Governing Production,” Carl H. Beal and J. O. Lewis, 1921; No. 195, “Underground 
Conditions,’ A. W. Ambrose,. 1921; No. 201, “Prospecting and Testing for Oil and 
Gas,” R. E. Collom, 1922; No. 207, ‘‘Analytical Distillation,” E. W. Dean, H. H. Hill, 
N. A. C. Smith and W. A. Jacobs, 1922; No. 210, “Oil Shale,” M. J. Gavin, 1924; No. 2384, 
“Manual for Oil and Gas Operations,” T. E. Swigart and C. E. Beecher, 1923. 

t This consisted of Messrs. H. Foster Bain, J. G. Bradley, D. M. Folsom, F. P. Han- 
away, J. V. Reynders, C. P. White. See the California Oil Bulletin, April, 1926, p. 425. 


OILDOM: ITS TREASURES AND TRAGEDIES 251 


publication of statistics; (2) investigation of operating methods within 
the industry with a view to the reduction of losses in the production, stor- 
age, and transportation of crude oil and petroleum products, and to the 
dissemination of data in regard to improvements in operating practice; 
(3) research work into the characteristics of oils and the treatment and 
utilization of products. It recommended that the collecting of statistics 
be transferred to the proposed economic branch of the Bureau and that 
the method of collecting and the form of publication of these statistics be 
carefully revised to make the figures of greater value to the industry. 
Suggestions were also made for the investigation of operating methods. 

Contributions to the National Defense. An indirect aid in safeguarding 
our country has been through the conservation of the underground oil 
reserves by preventing water invasion, as already mentioned. Increasing 
the percentage of recovery obviously also promotes the national defense. 
During the war two particularly important accomplishments were credited 
to a Bureau of Mines man—the chemist, Col. George A. Burrell. .These 
refer to research work in chemical warfare of which he had charge, 1917- 
1918, and to his discovery of a supply of helium in Texas. He initiated 
the Government helium program whereby this non-inflammable gas was 
extracted and finally used in dirigibles.+ During the late war, Director 
Manning served on the National Cooperative Committee on Oil and the 
Bureau itself rendered great service in many ways other than those 
mentioned. 


GEOLOGICAL SURVEY AND INTERIOR DEPARTMENT 


Cosmopolitan Character of Interior Department. In former years new 
bureaus found their way into the Interior Department if they could not 
logically be allocated elsewhere. As a result, it became the most com- 
prehensive and cosmopolitan of all the Government departments. Its rule 
ranged from Alabama to Alaska and from Florida to California. Its 
geologists and topographers climbed to the tops of ice-clad mountains and 
its engineers descended into the deepest mines. Its Bureau of Education 
encouraged reindeer raising in Alaska and taught the redskir various 
tricks. Through the Reclamation Service it drained the dismal swamps 


~ “The Linde Air Products Co. developed the successful process (of recovering helium 
from the natural gas in the Petrolia field). The Navy Department contracted with this 
company in 1919 for designing, building and operating the only helium producing plant 
in the world, located at Ft. Worth. In April, 1921, the initial cost of production was 
$500 per 1,000 feet * * * since reduced to about $50. * * * The production on 
a commercial scale was forced on the Government * * *: (1) By military necessity; 
(2) in order to develop * * * processes by which helium can be obtained for a 
cost compatible with its use in commercial airships. The Government will later look 
to the great industries to carry on the work and permit it to return to its normal 
and rational pursuits. * * * Helium is truly a by-product of the petroleum 
industry; but is not an asset or a liability? The Navy has demonstrated the prac- 
ticability of helium-filled airships; the Government has developed processes for the 
recovery of helium; the Bureau of Aeronautics has developed a water-recovery apparatus 
which avoids the necessity for valving helium during flight; the Government has forced 
the design of cheap transportation—the helium tank car, without which the use of 
helium would be impracticable; American industries are established for the manufacture 
of all materials and equipment needed for constructing. and equipping airships. * * * 
From these facts, only one conclusion can be drawn—helium is an asset to the petroleum 
industry and one of no minor importance.’—Rear Adm. W. A. Morrert, before the A. 
P. I. meeting at Ft. Worth, December 12, 1924. See The Literary Digest, April 29, 
1922, pp. 52-53. 


\ 


252 OILDOM: ITS TREASURES AND TRAGEDIES 


and ‘watered the desert wastes, thus aiding and extending agriculture. 
Through the Geological Survey it likewise pioneered for petroleum and 
the mineral industry in general. Through the Land Office it lent aid to 
land seekers without interfering with the profitable retail trade of private 
realtors. Through the Patent Office it formerly promoted and protected 
the invention of devices and processes whether for reaping grain or for 
refining petroleum. In fact, it became so vast and varied that one of the 
world’s greatest office buildings, erected especially for the Interior De- 
partment, did not quite suffice to house the horde of clerks and other help 
employed in Washington alone. This department is still quite complex 
and even after the loss of the Bureau of Mines, July 1, 1925, is able to offer 
a variety of superior petroleum services to the public and particularly to 
the operators. More than ever before is it now operated on a business 
basis under the progressive direction of Secretary Hubert Work. 

Indian Office Important in Petroleum. The Office of Indian Affairs is 
charged with the protection of the health, wealth and happiness of the 
American Indian and his advancement to the competency of the average 
white man so that present restrictions may be removed and the privileges 
of full citizenship be conferred on him. The protection of his wealth alone 
is a tremendous task now that the possession of the dependent ones well 
exceeds $1,500,000,000. At the close of 1923 the value of both individual 
and tribal property, including that of oil, gas, coal and other minerals, 
totaled $1,011,000,000, a gain of $283,000,000 over 1922. It was $342,000,- 
000 more than in 1913, the increase being largely due to the development 
of oil lands in the Osage country. In 1923, 54 million bbls., or one-third of 
Oklahoma’s output, was derived from Indian lands. The revenue that year 
from oil and gas leases approximated $37,000,000, of which over'$30,500,000 
went to the Osages alone and nearly 
$5,600,000 to the Five Civilized Tribes. 
Since then the Navajos of New Mex- 
ico have also participated in petro- 
leum income following discoveries on 
the Hogback and Rattlesnake domes. 
In his administration, Comr. Chas. H. 
Burke is ably assisted by J. G. Wright. 
who long has superintended the Osage 
Agency at Pawhuska.* 


THE DIRECTOR OF THE U. S. GEOLOGI- 
CAL SURVEY 


Probably no other Government official has 
been longer or more consistently concerned 
with the conservation of petroleum than 
George Otis Smith, who has been on his job 
over 16 years, while directors of other bureaus 
have come and gone. 


One of his most practical appeals to the 
oil industry was his able address, “‘A Produc- 
ing Program for Profits,’ before the Inter- 
national Petroleum Congress, published in 
“The Oil Trade,’’ November, 1924. / 


* See annual reports of the Commissioner of Indian Affairs; Marcosson’s “Black 
Golconda.”’ page 197; magazine section, Washington Star, August 31, 1924. “Navajo 
Leases Sell for $4.72 an Acre,” Oil Trade, November, 1923; “Sale of Ute and Navajo 
Leases,” Oil and Gas Journal, June, 24, 1926. 


OILDOM: ITS TREASURES AND TRAGEDIES 253 


Nomen, 


—Rig and Reel Magazine. 
HUNTING FOR OIL IN ESKIMO LAND, ALASKA 


A typical scene on the tundra or the low Arctic coastal plain where Philip S. Smith 
and his associates of the Survey have been “‘mushing’’ on the Government’s mission of lo- 
cating new oil deposits for the future supply of the U. S. Navy. 


Geological Survey’s Search for Structures. The opulent Osages owe 
greatly to this Government organization their procural of liberal bonuses 
(up to $14,200,000 at one auction, March 8, 1924) and their receipt of large 
royalties. Probably no equivalent petroleum area elsewhere in the world 
has been so completely covered with structural maps before the successive 
and final development of its various and numerous domes, anticlines and 
-terrace structures as the 1,500,000 acres* of this leading oil county in 
Oklahoma. Most of the acreage on each structure was leased at the 
Pawhuska auctions only after the Geological Survey had initiated in 1917 
its extensive field work in the Osage “nation,” and in many cases had is- 
sued advance reports with maps and sections as guides to the prospective 
buyers in the event that they wished to avail themselves of such inex- 
pensive but money-saving and money-making information and advice.+ It 
was considered the most promising undeveloped territory at the time of 
our entry into the war and the investigations by the Survey were made in 


* Almost the same as the total land and water area of Delaware, 2,370 square miles. This 
acreage was bought from the Cherokees by the Federal Government for the Osages at 
only 70 cents an acre. ; 


+ David White, chief geologist of the Survey for many years, lamented the lack of 
information, betrayed by the bidders in the size of the bonuses paid. ‘Although some 
had examinations made by geologists for their exclusive benefit, many tracts with favor- 
able structures were neglected and large bonuses paid for others that may never yield 
oil in commercial quantities; * * * all the more unfortunate since later leases require 
drilling within nine months after approval date. * * * (In drilling unnecessary dry 
holes) the loss of the driller in bonuses, labor, equipment, supplies and transportation 
and even his loss of time and opportunity through fruitless boring in an area of dis- 
tinctly unfavorable structure constitute an economic waste that affects the military effi- 
ciency of the Nation.’’ See Bulletin 686, U. S. G. S., p.. X; also The. Oil Weekly, 
September 16, 1922. 


254 OILDOM: ITS TREASURES AND TRAGEDIES 


response to the imperative need for increasing to the utmost our petroleum 
supply. K. C. Heald had immediate charge of this important work.t 

The Survey’s Explorations in Alaska have been concentrated on Naval 
Petroleum Reserve No. 4 since this area of more than 35,000 square miles. 
near Point Barrow was set aside early in 1923 by President Harding. 
Mapping of this northernmost part of the United States has involved four 


seasons of.the most strenuous labors of many Survey men. They have 
traveled thousands of miles by dog team in the dead of winter and by 


canoe in the equally trying days of summer. During the summer of 1926 
Dr. Philip S. Smith, chief Alaskan geologist, and G. FitzGerald, topog- 
rapher, tried to complete the major problems of geography and geology 
in this polar desert where the annual rainfall is under 10 inches.* | 

Increasing Value of the Survey’s Service. The work of the Geological 
Survey in connection with oil continues to increase in value. The appli- 
cation of geology to practical affairs is shown by the fact that in four oil 
fields extensively developed the early geologic mapping indicated the ex- 
istence of oil in the ground. Many costly mistakes would not be made by 
beginners in the oil business if they would study the maps and reports, 
particularly the bulletins, issued by this constructive branch of the Gov- 
ernment as results of its scientific investigations. The direct service of 
George Otis Smith, the director, and his highly trained staff of courageous 
and conscientious: geologists, geographers and others can not be measured 
in terms of mere money. More appreciated by the industry is the indirect 
service of these men (and women) after their liberation for private work 
where a “living wage” is paid more in harmony with their worth.+ 

Public Land Relations and New Leasing Duties. The Survey has acted 
‘on more than 25,000 cases referred to it in the administration of public 


The big Burbank field was found six years ago by that strong believer in geological 
science, E. W. Marland, in the western part of Osage County where but little detailed 
work had so far been done. He paid $12.50 an acre in May, 1920, for his lease on the 
discovery tract of 160 acres, and less than a year later only $5 an acre was paid for 
two leases by others, one adjoining and another two miles away. In September, 1922, 
Gypsy (Gulf Oil) paid $10,000 an acre, and in May, 1924, Cosden and Midland each paid 
almost $12,500 an acre. 

* From Nenana, on the Government railway in the heart of Alaska, they proceeded 
along the mail route, down Yukon River, and on for 600 miles to the town of Kotzebue 
on the Arctic Ocean. See Bulletin 783-E, U. S. G. S., 1926; press bulletin 6331, April 
8, 1926; “Oil Developments in Alaska,’’ in which, before the February, 1926, meeting of 
the Am. Inst. Min. Engrs., P. S., Smith stated that the entire output since 1904 was 
worth less than $1,000,000, but that there are four fields in which petroleum has _ been 
found in seepages: (1) Yakataga, southwest of Mt. Elias; (2) Katalla on the coast in 
south central Alaska; (3) Alaskan Peninsula on west coast of Cook Inlet from Iniskin 
and Oil Bays southwest to Chignik; (4) northern Alaska now held as Naval P. R. No. 
4> See also The Rig and Reel Magazine (of Parkersburg, W. Va.), May and June, 
1924; “Hunting Eskimoland for Oil,” by Guy E. Mitchell, U. S. G. S. 

+ ‘The foundation for the more general acceptance of the geologist by the oil industry, 
which prevails today, was largely laid by the series of. intensive studies of known oil 
fields made in the early 1900’s by the U. S. G. S. The reports on pools examined in 
Pennsylvania by R. W. Stone and F. G. Clapp; in Ohio by W. T. Griswold and M.- J. 
Munn; in Coastal Texas and Louisiana by C. W. Hayes and. Wm. Kennedy as well -as 
by G. D. Harris and A. C. Veatch of the Louisiana Survey; and above all, California by 
Ralph Arnold, Robert Anderson, Harry Johnson and others, for the first time made 
available details covering a number of widely distributed pools. About 1907, many of 
the men who had made these early reports established themselves as consulting geologists 
and from this period until 1918-1914 geology won its way. rapidly into the industry. 
Since 1914, the employment of geologists has been fairly general.”—From “The Geologist 
and the Petroleum Industry,” by E. DeGolyer, A. P. I., Ft. Worth, December, 1924, 


OILDOM: ITS TREASURES AND TRAGEDIES 255 


lands. A few years ago the areas classified and reserved were as fol- 
lows, in millions of acres: Coal, 65; petroleum, 65; oil shale, 4.1; phosphate, 
2.7. Before the middle of 1925, it had been involvel with the public domain 
only in an investigative and consulting capacity. At that time the Survey 
relieved the Bureau of Mines of its public land mineral leasing duties.’ To 
quote Director Smith: “Secretary Work’s transfer of the mineral leasing 
supervision * * * permits a new line-up of the Interior Department’s 
activities in promoting development of the public domain. The protection 
of the public estate, the guidance of the development of its resources, the 
promotion of wise use of the products therefrom are practical objects, all 
summed up in the one word, conservation. So it is that to the land classi- 
fication activities of the Geological Survey are now added the supervision 
of the leasing of the oil, coal and other minerals, on the public and Indian 
lands. The two types of work are closely related and have had some in- 
formal connection in the past, but now they may be directly coordinated 
so that the oil geologist and the oil engineer, for example, will work in 
close contact on their common problem of wise administration of the re- 
sources in public ownership.” , 


Oil Shale Work Foreshadows New Fuel Supplies. The development of 
our huge oil shale resources was arrested by the Drake discovery of petro- 
leum in 1859. About 1910 interest in our Western shale-beds was re- 
newed. * * * Our Government, realizing the rapid depletion of our 
oil resources, undertook to foster interest in and assemble data regarding 
our shale-beds. In 1913 the U. S. Geological Survey sent a body of field 
investigators to examine the colossal deposits in Colorado, Utah and Wyo- 
ming (page 120). Thus began the research that has been kept up in 
field and laboratory since that time. * * * In doing this work the Sur- 
vey effectively illustrated one of the high functions: of a federal govern- 
ment, namely, to play the role of pioneer and experimenter, foreseeing 
the social and economic needs of the nation, and doing the necessary ground 
work of research in that important period before the incentive of imme- 
diate profit has begun to draw private investment and initiative into the 
field.* (On “Nationalization” see below and pages 243-5.) 


STATE AND TREASURY DEPTS. AND INDEPENDENT BOARDS 


The State Department Aids in Foreign Oil Development. It has been 
of indirect assistance to the American operators in connection with oil 
problems by insisting on the recognition of treaty rights and other guar- 
antees, such as most-favored-nation clauses and mandade provisions. The 
Department of State has stood steadfastly for the principle of the “open 
door” or equal opportunity in the Dutch East Indies, Mesopotamia and 
Persia.j Under the able administration of Secretary Kellogg the Mexi- 
can Division of the Foreign Office is now preoccupied in protecting Amer- 


* Abstracted from The Century Magazine, February, 1921, p. 542, “Defeating the Oil 
Famine.” See also, ‘Oil Shale of the Rocky Mountain Region,’ Bulletin 729, by Dean 
E. Winchester, U. S. G. S., 1923; “Geol. Survey and Land Office Do Big Oil Business,” Oil 
Trade, December, 1926. 

t In an excellent article in Mining and Metallurgy for July, 1922, Attorney L. H. Woolsey 
outlines the limitations of the State Department and tells how it can be of further help 
in oil development abroad. See also address by Arthur N. Young, Ph. D., economic adviser 
of the Department of State, at the Institute of Politics, Williamstown, Mass., 1925. 


256 OILDOM: ITS TREASURES AND TRAGEDIES 


ican oil properties in the Tampico region from ruthless confiscation and 
eventual nationalization as already effected by the Soviet Government. 


The Treasury Department Collects Income Tax. Through the Bureau of 
Internal Revenue this department comes in close and extensive contact with 
the American oil industry. Within its Income Tax Unit (“I. T. U.”) there 
gradually grew up the Natural Resources, now the Engineering Division,* 
devoted to the appraisal of mineral and timber producing properties and 
the auditing of tax cases concerned with natural resources. Of the engineer- 
ing sections into which this Division became divided the most important 
since the war has been the Oil and Gas Section with which the author was 
identified during most of the 88 months in which he served as a valuation 
engineer. Valuations were generally based upon data supplied by the 
crude oil and gas producers for the determination of depletion allowances 
under the various revenue acts, also for the determination of profits or 
losses resulting from the sale of petroleum properties. At one time, from 
1922 to 1923, over 50 valuation, assistant and associate engineers were 
employed on oil and gas cases, but very few of them in the field. 

The Oil Relations of the I. C. C. The Interstate Commerce Commis- 
sion, through the Bureau of Service, supervises pipeline and railway trans- 
portation of petroleum. There is hardly a mile of our 265,000 miles of 
main line track over which petroleum products do not move, chiefly by 
means of 153,000 tank cars. About 80,000 miles of pipeline are devoted 
exclusively to the moving of mineral oil. The carlot movement of petro- 
leum and its products in 1925 aggregated over 1,951,000 carloads or 5% 
percent of the total carload traffic originated that year in the United 
States. This exceeded by 55 percent the similar shipments of 1,258,000 
carloads in 1920.t | 

The U. S. Shipping Board Once a Big Consumer. Since this body has 
been steadily disposing of its bottoms to private owners and operators 
of marine vessels, its consumption of fuel oil and other oil products has 
been declining. Of steel tankers alone it owned on June 30, 1926, 29 of 
242, 663 deadweight tons after transferring 12 of 131,680 tons to Gov- 
ernment departments and selling 109 of 1,073,150 tons. Of 8 concrete 
tankers it had lost 1, transferred 3 and sold 38. 


GOVERNMENT NEEDS AND THE NAVY DEPARTMENT 


Our Federal Government the Greatest Consumer. Departmental de- 
mands now aggregate 20 million barrels per annum. No single commer- 


* Originally this was organized in 1918 as the Oil, Gas and Mines Section through the 
cooperation of Ralph Arnold, Carl Beal, Jas. L. Darnell, J. O. Lewis, G. B. Richardson 
and BE. W. Shaw. The first head was Ralph Arnold, who was followed by J. L. Darnell. 
After the segregation of the Oil and Gas Section the chiefs thereof were as follows, in 
order of succession: Frank Herald, C. F. Powell, Norval. White, Russell Beall, S. M. Green- 
idge and W. N. Thayer. The present head of the entire: Engineering Division is Andrew 
Walz; assistant head is Samuel Hatchett. Chief of the Oil and Gas Section is Geo. W. 
Campbell assisted by Percy L. Ports as reviewer and Wm. G. Cullen, who are probably 
the oldest valuation engineers in point of continuous service. Stanley Sears is now chief 
of the Mining Section, E. L. Lindsay of the Timber Section, Frank Eddingfield of the 
Appeals Section, and J. M. Clark of the Appraisal Section. J.C. Dick, of Utah, was head 
of Natural Resources when the author entered the I. T. U. in May, 1920. His successor 
was C. F. Powell, who was followed by Albert H. Fay and S. M. Greenidge. 

t Abstracted from address of Director Wm. P. Bartel before the A. P. I., Tulsa, December, 
1926. See The Oil and Gas Journal, December 9, page 88. 


OILDOM: ITS TREASURES AND TRAGEDIES 257 


cial consumer of petroleum compares with Uncle Sam in this respect. This 
quantity is almost half as great as that required by all the oil burning 
locomotives on the American railways (page 96). Louisiana, the seventh 
state in oil, alone barely supplies as much. The entire output of Ohio, 
Pennsylvania and West Virginia together in 1926 would have to be taken 
to fill the bill in crude equivalent. Naturally the Navy needs more petro- 
leum products than any other department, although it still consumes con- 
siderable coal—about one-third million tons, costing annually about $2,- 
800,000. The demands of the Department of Justice is likely the least of 
any. Army trucks and postal airplanes require both gasoline and lubri- 
ecants. The Treasury Department, through the Supervising Architect, must 
see that all the Federal buildings throughout the country are kept warm 
in winter time. The Government, however, does not look favorably upon 
the use of oil for heating where coal is available.* 


The Navy’s Increasing Call for Liquid Fuel. Coal is not altogether in 
disfavor, for in some places or for some purposes it is preferred because 
of local economy or peculiar requirements. About 340,000 tons measure 
the annual demand of the Navy for solid fuel at a cost of about $2,800,000. 
About 7,350,000 gauges the peace-time need of the Navy for liquid fuel 
including fuel oil (7,000,000 bbls.), gasoline (190,000 bbls.), Diesel oil 
(110,000 bbls.), and lubricating oils (50,000 bbls.). In time of war this 
consumption would immediately increase to four or five times the above 
stated quantities, depending upon the theater of action.} 


Buying and Storing Petroleum Supplies. These products are purchased 
usually under annual contracts for delivery at the various ports within 
the United States most convenient for the use intended. Bids are invited 
according to advertised specifications. For the storage of these products 
the Navy has constructed at a number of naval stations and fuel depots 
the usual type of containers known to the commercial oil world. The 
total capacity for fuel oil storage is 7,244,000 bbls., 3.4 times what it was 
six years ago. The more important storage points are at Pearl Harbor, 
Hawaii; Yorktown, Va.; Portsmouth, N. H.; Guantanamo, Cuba; Puget 
Sound, Wash.; Melville, R. I.; Balboa and Cristobal, Canal Zone; Cavite, 
P. I.; Hampton Roads, Va.; San Diego, Calif. Additional stocks are at 
Boston, Key West, Charleston and Norfolk. Only a few of these are dis- 
tributing points for naval Diesel oil, but many of them carry gasoline 
supplies for trucks, launches and hydroplanes. 


* Post offices and custom houses on the Pacific Coast are occasionally heated on a 
small scale, using fuel oil to generate the steam heat. The author recalls receiving bids 
for such oil of about 18 degrees B., early in 1911, while he was acting as custodian of 
the Federal building in Les Angeles. ‘The District of Columbia is reasonably close to 
coal fields; but both economy and convenience dictated the construction of a central oil 
burning plant about two years ago. See ‘“‘Government to Heat Buildings with Oil,’ by 

{ Production from Government lands during the five years before 1926 was as follows, in 
thousands of barrels, according to the Oil Conservation Board: 


Sources 1921 1922 1923 1924 1925 

Crude’ from’ Naval Reserves is coco. ecccke cc eeae 2,154 7,205 11,427 13,032 12,371 
Cnirdetfrommeubie Oma nies sce cies cece ee ee 9,215 20,997 36,574 12,647 17,226 
MPOtals CLUudey PECHOlCUM « «sau cisitisiccs dere eee 11,3869 28,202 ~° 48,001 25,679 29,597 


Output from Indian lands under Government supervision exceeded 596,795,000 bbls. of oil 
during the 26 fiscal years 1899-1924, and approximated 48,486,000 bbls. during the year 
ended June 380, 1925. 


SKETCH MAP 
- GEOGRAPHIC RELATIONSHIP 


ELK HILLS FIELD TO OTHER | 


‘OIL FIELDS OF. KERN co. 
Accompanying Report ible eee Petroleum Engineer 


(Toe me mene oy cee ta were ea 


18 viten 


SS, California oe Mining Bureau 


COLLOM 


State oi ta Gas Supervisor 


ra ae 
ste oo ty ne SA 


|| fe ee NOS 


som wd 
ae st eet 
=e hd - 1. |. | 
ae one Y \d 8°" SrawoAro FA, 


J 
eee ip 
> ae eo, 
¢ @e oil Fields 
ZZ  Buttonwiliow Area 


THE DOHENY LEASE 


(Pan American Co.) 


MAP OF ELK HILLS NAVAL RESERVE No. 1. (California) 


Showing situation of lands owned by producing oil companies within and 
adjoining the Reserve, which drained and threatened further drainage of the 
Reserve, and made leasing necessary, to save the Navy’s oil for the Navy. 


s.0.¢0 “p0.co PO CO BRBBBZ,.P oO COU sess. 


pene {. AND zed 
ee CO -_.UW \ 
me P.O CO PO ot’ 


a 2 


LEGEND. 


. 
PACIFIC Ol CO 


STANDARD Ol CO sf CALIF 


ey NAVAL RESERVE NP] 
UNDER LEASE TO PRN AMERICAN CO. 


wmsnsnse BOUNDARY OF NAVAL RESERVE [0] 


Y 
Y NAVAL RESERVE LEASE TO BELRIDGE OU. CO 


J 
MISCELLANEOUS PRIVATE LANDS 


OILDOM: ITS TREASURES AND TRAGEDIES 259 


Unknown Underground Reserves. As a source of supply for the future 
and for emergencies, there have been set aside certain areas of public 
lands as Naval Petroleum Reserves, following field work by the Geological 


Survey. 

Reserve Acres Location Reserve Acres Location 
NOL ys noe cee 31,892 Kern Co., Calif. - IN Oae4 28s sich 22,400,000 Pt. Barrow, Alaska 
INGapZEN ah ciske icteiers 10,417 Kern Co., Calif. Shale No.1. 36,550 Garfield Co., Colo. 
INGstlOger crete ine 9,321 Natrona Co., Wyo. Shale No.2 . 86,584 Uinta Co., Utah 


Reserve No. 1 is under lease almost in its entirety to the Pan-American 
Petroleum Co. The Government brought suit for the revocation of this 
lease, winning in the lower courts. Appeal to the Supreme Court was to 
have been heard as this book was in press, late in 1926. Reserve No. 2 
is under lease to various oil companies under sliding-scale royalties up to 
30 percent or more. Owing to the fact that Pacific Oil Co. (now part of 
the new Standard Oil of California) is the owner of alternate sections 
within this reserve, its use as a source of future supply is of little value. 
The average monthly royalty received by the Navy from these two re- 
serves approximates 225,000 bbls. Measured in money (a secondary con- 
sideration) at $1.30 a barrel this would mean an annual income of $3,510,000. 


sapsoanes as 


—The Lamp. 
SCENE IN THE DEVELOPED PART OF THE ELK HILLS DISTRICT, CALIFORNIA 


_This district (in Kern County which has produced almost as much oil as Mexico) con- 
tains Naval Reserves No. 1 and No. 2 of 31,892 and 10,417 acres, respectively. Elk Hills 
became a large producer in 1920 after some completions were made in 1919. It is still 
largely undeveloped although yielding at the rate of 35,000 barrels daily in June, 1926. 
Among fields in the San Joaquin Valley it now ranks next to the immense Midway-Sunset. 

Reserve No. 3 was under lease to the Mammoth Oil Co., a Sinclair sub- 
sidiary. The lease was invalidated on September 28, 1926, by the U. S. 
Circuit Court of Appeals and the defendant ordered to make restitution 
of the oil removed. It had been yielding a monthly royalty of only 5,000 
bbls. Reserve No. 4, as elsewhere related, lies within the Arctic Circle in 
Alaska. Its inaccessibility makes it of doubtful value even if oil in large 

‘quantities be discovered.. 


CONSERVATION WORK ACCOMPLISHED AND REQUIRED 


Wide Field for Conservation Work. In recent years public-land legis- 
lation has sought to promote the best utilization of the water power, the 
conservation of flood water, reserving of coal land from agricultural entry, 
and the protection of the .oil industry from. itself, by discouraging pro- 


260 OILDOM: ITS TREASURES AND TRAGEDIES 


duction in advance of possible needs. All these efforts towards wiser use 
of the great natural resources of the West were made by the Federal 
Government in its capacity as the largest landowner. The protection of 
the public estate, the guidance of the development of its resources, the 
promotion of the best use of the products from the national domain are 
practical objects, all summed up in the one word conservation. 


World’s Richest Owner of Fuel and Phosphate Reserves. The United 
States owns about 30 million acres of coal lands with valuable coal de- 
posits of over 200 billion tons. It has one-half million acres of phosphate 
lands which can supply 8 billion tons of this essential fertilizer when 
needed for American farms. There are 4 million acres of oil shale in the 
public domain from which possibly 60 billion barrels of oil can be ex- 
tracted when prices warrant the higher cost of its development:, Before 
that time, however, there are millions of barrels yet to come from wells 
on Government lands, the amount now being taken from public and In- 
dian lands, representing one-tenth of the nation’s annual petroleum pro- 
duction (about 75 million barrels in 1924, or more than the entire country 

produced in 1900). 


Kssentials for Safeguarding This Vast Estate. To protect this for fu- 
ture generations and permit its economic development to supply present 
needs requires foresight and administrative skill. Five years ago Con- 
gress enacted the general leasing law which established the system of 
leasing mineral deposits on public lands to private operators, the Govern- 
ment to receive bonuses and rentals as well as royalties. There are now 
(December 1, 1925) outstanding 211 leases on Government coal lands and 
422 on oil and gas lands. To supply this policy a new line-up of mineral 
leasing activities was affected in the Interior Department through the 
organization of a conservation branch in the Geological Survey. In this 
enlarged unit were placed geologists and engineers designated to act as 
technical advisors and administrators in the classification of the public 
lands. In addition, their duties consist of inspecting mine operations and 
cooperating with the private operators to avoid waste in the production 
of minerals on the public domain. 


Oil and Gas Leasing Work Was Reorganized in the Conservation Branch. 
Three field divisions (California, Mid-Continent and Rocky Mountains) 
were established under jurisdiction of district supervisors or engineers in 
charge. They were given full authority and responsibility to conduct 
operations and represent the Government in problems necessitating im- 
mediate decision not involving departmental policy, in place of the old 
practice of referring all questions of administration to the Washington 
headquarters. * * * A feature stressed by the Geological Survey is 
the scientific examination of mineral areas of the public domain to promote 
and guide development. * * * With the creation of this new unit it is 
believed that the custodial care of our natural wealth of oil and gas, coal 
and other minerals has been placed on a practical administrative basis. 
Engineering efficiency, avoidance of waste, and the wide use of these re- 
sources are now being practiced and future public interests are being pro- 
tected.* 3 


* These three preceding paragraphs have been extracted from Secretary Work’s recent 
review of advance in conservation of natural resources. 


OILDOM: ITS TREASURES AND TRAGEDIES 261 


Conservation of Private Deposits not Controlled. Uncle Sam is helpless 
to prevent waste of oil and gas in their production from privately owned 
properties. He can only educate and advise if consulted. Since neither 
Congress nor the executive offices of the Federal Government have power 
under the Constitution to control such productions or to regulate the same, 
the only available remedy lies in judicious state legislation. State laws 
alone can prohibit the blowing of gas into the air in order to get through 
to the underlying oil.+ 


THE ORIGINAL OIL CONSERVATION BOARD AND ITS SECRETARY 


Designated by President Coolidge, December 19, 1924. Since then the late Mr. Weeks 
(at extreme left) was succeeded by Dwight F. Davis (see page 130). General Counsel (not 
in photograph) is Charles W. Waterman; Secretary, Edward S. Rochester. Technical and 
Advisory Committee—George Otis Smith, Maj.-Gen. Edgar Jadwin, Rear Adm. H. H. 
Rousseau, and Harry H. Hill. 


THE FEDERAL OIL CONSERVATION BOARD, 1925-1926 


Purpose of Appointing the Board. It was created Dec. 19, 1924, by Pres- 
ident Coolidge, not to serve as a salve or sinecure for “lame ducks” but to 
utilize established Government machinery in an earnest effort to accomplish 
four more or less related objects: (1) To coordinate and strengthen the 
current conservation work of the Federal bureaus; (2) to find all facts 
that might shed broader and better light on the needs and means for both 
public and private saving of natural resources in oil and gas as well as 
their ultimate products; (3) to invite and invigorate complete and sound 
cooperation with the oil industry itself, and (4) to disseminate the results 
of its investigations so that the millions of American consumers may do 
their share to avoid waste of the very products which at any time may be 
indispensable for the National Defense. 

Part of the President’s Letter Creating the Board. “It is evident that 
the present methods of capturing our oil deposits is wasteful to an alarming 
degree in that it becomes impossible to conserve oil in the ground under our 
present leasing and royalty practices if a neighboring owner or lessee desires 
to gain possession of his deposits. Developing aircrafts indicate that our 


t E. B. Reeser, vice-president, Barnsdall Corp., quoted in Nat’l Petroleum News, Decem- 
ber 2, 1925. See also ‘“‘A Big Step toward Conservation,” in which W. C. Teagle told the 
Federal Oil Board how fuel oil and the new cracking process influence petroleum 
economics; reprinted in leading periodicals and. abstracted herein on page 268. 


262 OILDOM: ITS TREASURES AND TRAGEDIES 


national defense must be supplemented, if not dominated, by aviation. It 
is even probable that the supremacy of nations may be determined by the 
possession of available petroleum and its products. I am advised that our 
current oil supply is kept up only by drilling many thousands of new wells 
each year, and that the failure to bring in producing wells for a two-year 
period, would slow down the wheels of industry and bring about serious 
industrial depression. The problem of a future shortage in fuel and lubri- 
cating oil, not to mention gasoline, must be avoided, or our manufacturing 
productivity will be curtailed to an extent not easily calculated. We are 
not today, however, facing an under supply of oil. The production of our 
300,000 wells is in excess of our immediate requirements. That overpro- 
duction in itself encourages cheapness, which in turn leads to wastefulness 
and disregard of essential values. Oil, of which our resources are limited, 
is largely taking the place of coal, the supply of which seems to be unlimited, 
but coal can not take the place of oil in most of its higher uses, on land or 


sea or in the air.” 7 
Unostentatious but Effective “Modus Operandi.” The Secretaries of 


Commerce, War, Navy and ‘Interior organized themselves early in 1925 
and lost no time in tackling their big job, aided by an able Secretary in 
the form of an experienced publicist, E. S. Rochester. Work was prose- 
cuted principally along three lines: (1) Conferences between themselves 
and their consultants in the different departments; (2) questionnaires sent 
to producers, refiners, marketers, engineers, geologists and economists as 
well as others competent to furnish facts or to express opinions of value; 
(8) semi-public hearings which marked momentous progress in coopera- 
tion and understanding between Government and Industry. The hearing 
held in February was a noteworthy one, in that never before, to the writer’s 
knowledge, had such a spirit of good-fellowship been shown at any similar 
meeting. On this occasion there gathered together the ablest representa- 
tives of the oil business and of the Federal.Government which included 
Cabinet members and petroleum experts. 

Oildom’s Answer Anticipated Inquiries. In August, 1925, the A. P. I. 
Committee of Eleven, for the purpose of allaying public fear as to failing 
supplies of petroleum, presented in book form a very fine report on “Supply 
and Demand.’’* There were 13 instead of 14 points in the Summary of 
Conclusions: (1) No imminent danger of exhaustion of our petroleum 
reserves; (2) a sufficient supply of oil will be available for National defense 
and for essential uses beyond the time when science will limit the demand 
by developing more efficient use of or substitutes for oil, or will displace 
its use as a source of energy by harnessing (an other) natural energy; 
(3) current supply and demand (see Chapter XIII) can not stay in balance, 
since the amounts of both are constantly changing; (4) petroleum recover- 
able by present methods of flowing and pumping from existing wells 
and acreage thus proven is estimated to consist of 5,300,000,000 bbls. of 
crude oil; (5) thereafter there will remain in areas now producing and 
proved 26,000,000,000 bbls., a large part of which can be recovered by im- 
proved and known processes such as flooding, air and gas pressure, and 

* Although this committee consisted of leading lights in Oildom and its report was 
rather comprehensive because it was not confined to petroleum but included oil shales 
and coals as future sources of supply, it was subjected to severe criticisms from members 


of the Institute. See p. 142 The Oil and Gas Journal, November 5, 1925; also Oil 
Bulletin, September and The Oil Weekly,.: August 21, 1925. 


OILDOM: ITS TREASURES AND TRAGEDIES 263 


mining, when price justifies; (6) deeper drilling will disclose deposits 
hitherto unavailable in producing fields—tantamount to the discovery of 
new fields—and through more perfect production methods the deep oil 
may be recovered; (7) the major U. S. reserves lie in about 1,100,000,000+ 
acres of land underlain by sedimentaries in which geology shows oil possi- 
bilities; (8) additional reserves appear in the vast deposits of oil shale, 
coal and lignite, from which liquid fuel and lubricants may be extracted 
if, and when, the recovery cost is justified by prices; (9) Latin America 
has large petroleum resources for the output from which the United 
States is a natural market and the supply therefrom must inevitably 
influence the drain on our reserves; (10) availability of future petroleum 
supplies from the vast area above mentioned depends upon adequate 
incentives to the exploration which has so far supplied all the nation’s 
needs for oil in peace and in war*; (11) more efficient utilization will 
lengthen the supplies, as, for instance by doubling or trebling the motor 
car mileage per gallon of gasoline; (12) through improved methods, prin- 
cipally the cracking process, the refining branch has already increased the 
yield of gasoline, now the major product of petroleum, and in consequence 
of the draft on fuel oil for additional cracking this former main product 
may eventually be removed from (the cheapening) competition with coal 
(see pages 95-99); (13) (wilful?) waste in the production, transportation, 
refining and distribution of petroleum and its products is negligible. 

A Scientist’s Sidelight on Our Future Oil Reserves. In Mining and 
Metallurgy for April, 1925, appeared the results of an independent study 
of this subject,t the summary of which follows: (1) Our reserves are being 
rapidly depleted; (2) our consumption is steadily mounting; (3) substitutes 
for gasoline are known to be insufficient to meet the situation; (4) our 
ownership in foreign oil is limited; (5) stability of prices and certainty 
of supply cannot be assured with imported oils; (6) the threatened deple- 
tion of our reserves entailing the passing of the United States from the 
position of supremacy in the world’s natural petroleum production, shows 
the wisdom of Great Britain’s support of her nationals in the acquisition 
of potential oil reserves throughout the world. President Coolidge wisely 
grasping the situation, appointed a Federal Commission to study the 
petroleum problem confronting the nation. This Commission is receiving 
cooperation from the entire industry and its findings will be looked upon 
with the utmost respect. It is asking the oil industry to propose the 
remedies to prevent waste and to work out ways to obtain the highest. 
possible degree of efficiency of such oils as we have. 
~ + Some authorities discount this high estimate since explorations over a long time and 
wide expanse within some of the states included entirely have resulted in little or no yield. 

* There must be: (a) Security in the ownership of oil lands and of the right to 
lease; (b) conditions of exploration and development by owners or lessees allowing 
exercise of initiative, liberty of action, play of competition, and free working of the 
supply and demand law; (c) prices that will give a return to producers, refiners and 
distributors commensurate with the risks and capital involved. The McGraw-Hill Book 
Co., 370 7th Ave., New York, published ‘Supply and Demand”; price, $3.00. 

¢ By ~Cassuis A. Fisher, consulting geologist and fuel engineer, Denver, Colo.; with 
the U. S. G. S. and Bureau of Mines, 1896-1912; U. S. Naval fuel exploration, Alaska; 
co-author with Ralph Arnold and Jas. L. Darnell of the original ‘Manual for the Oil 
and Gas Industry,” which was revised by the author and others in 1921 for the Bureau 
' of Internal Revenue. See also ‘‘Checking Up on Our Fuel Wastes,” by Floyd W. Par- 


sons in Nation’s Business, February, 1926; “Plenty of Oil in Sight?” by J. O. Lewis in 
The Compressed Air Magazine; abstract in The Literary Digest, September 4, 1926. 


264 OILDOM: ITS TREASURES AND TRAGEDIES : 


THE FEDERAL OIL BOARD’S FIRST REPORT * 


Concise and Comprehensive was this timely report tendered President 
Coolidge, September 6, 1926. A preliminary statement pertained to the 
present status of the oil industry which transports the crude from 300,000 
wells through 90,000 miles of trunk and gathering lines, 400 tank steam- 
ships and many jf tank cars to some 500 refineries. The industry has about 
$10,000,000,000 invested in producing wells, transportation, refining and 
marketing equipment. Under “Distribution of Use” it was shown that in 
1925 the crude petroleum produced was split by refinement into 49.3 per- 
cent gas and fuel oil, 23.4 percent straight-run gasoline, 9.1 percent cracked 
gasoline, 8.1 percent kerosene and 4.2 percent lubricants. Other topics 
taken up were “Known Fields,” “Possible New Fields,” “Improved Meth- 
ods of Recovery,” “Better Control of Production,” “Better Utilization of 
Crude,” “Better Mechanical Devices,” “Foreign Sources,” “Supplies from 
Oil Shale and Coal,” ‘Reinforcement of Supply,” “Control of Flush Flow,” 
“The Right of the State,” “Aid to Engineers,” “Voluntary Agreement of 
Owners,” “No Monopolistic Control,” “Government’s Own Problem,” “Pro- 
duction from Indian Lands,” ‘‘Legislative Remedy for Osage Leasing Evils,” 
“National Defense Requirements,” ‘Naval Storage Reserves,” “Continuation 
of Inquiry,” ‘‘Cooperation of States,” and “Cooperation Within the Indus- 
try.” Some of these subjects are considered below.t | 


Sources of Future Supply: (1) Reserves of about 4,500,000,000 bbls. 
available by flowing and pumping from more than 38,000,000 acres of 
proved and producing oil land; (2) possible discovery of new sands in- 
known areas by deeper drilling (as actually occurred at Spindle Top, sum- 
mer of 1926); (3) possible discovery of new fields (such as the Seminole, 
Okla., July 16, 1926); (4) improved methods which will recover a larger 
proportion of the oil out of the sands; (5) better utilization of crude oils 


* Chairman Work’s Significant Prelude. ‘This first report presents certain facts con- 
tributed by the oil industry or gathered by Government scientists. Facts and opinions re- 
ceived from these sources have been weighed with open minds, without conscious prejudice 
or thought of confirming theories preconceived. There are two sides to this nationally im- 
portant question * * * ; each has its proponents, and both sides are entitled to re- 
spectful consideration. (1) Many producers claim that the supply of petroleum, hitherto» 
equal to the demand, probably always will be and, should time prove the contrary, that 
substitutes for both lubricants and gasoline will be devised. (2) Other producers argue 
that almost every natural resource is limited and may be exhausted by wasteful use. They 
cite depletion of soil fertility, timber, and even fish in the sea, the exhaustion of old oil 
fields and the diminishing flow of all wells. They argue further that without discovery of 
new fields the present rate of output can not be maintained, and therefore urge that, as 
new discoveries are uncertain, improved methods of recovery, less waste, more ground ° 
storage, and checking of competitive haste in drilling are economic provisions that should 
be enforced. These conflicting opinions are based partly on facts and partly on conjecture. 
Such opinions are valuable only in proportion to the logic of their reasons, which therefore 
must be understood and analyzed. It is hoped that this first report, conscientiously pre- 
pared under the direction of this board by scientific men burdened with exacting daily 
routine duties, may furnish a concise picture of the true conditions * * #*.” 

+ 142,000 tank cars altogether ; used more for distributing refined products than for 
carrying crude oil. 

t Abstracts of the report have appeared in all periodicals on petroleum including Nat’l 
Petroleum News, Oil Trade, The Oil Weekly and Petroleum World. For the most complete 
reproduction of the report see C. E. Kern’s article in The Oil and Gas Journal, September 
9, 1926. The Outlook for September 15, 1926, editorially reviewed the report on page a 
The complete report is\sold by the Supterintendent of Documents for 10 cents. 


OILDOM: ITS TREASURES AND TRAGEDIES 265 


by diversicn from less to more essential uses—such as conversion of fuel 
oil into gasoline; (6) better control of the flush flow from newly discovered 
fields; (7) economies in consumption by improved mechanical devices; (8) 
supplies from distillation of oil shales and coal; (9) foreign oil fields. 

Proven or Known Oil Fields. In addition to the proven reserves at any 
one time, the known fields have in many cases proved of larger extent than 
at first estimated, due to the extension of the “fringes” of such fields. Par- 
ticularly is this the result of opening new sands and in some instances the 
extension of known sands by deeper drilling. There have been great ad- 
vances in the art of deeper drilling during the past few years. The first 
successful well drilled—in 1859—was to a depth of 69 feet. The capacity 
of machinery for deeper work was steadily developed until, in 1925, an 
oil well 7,591 feet was completed in southern Calfiornia.* At various 
stages in development it has usually been asserted that no greater depths 
could physically be attained, yet almost every year demonstrates the pene- 
tration to still lower levels. As many of the sands slope into the earth, 
deeper drilling of known sands will bring still further production as well 
as the discovery of deeper sands underneath those now being exploited. 

Possible New Fields. Certain parts of the country are known by their 
geology to be impossible of appreciable oil production. Such positively 
barren areas are estimated to aggregate 43 percent of the total of the 
United States. But this does not warrant the assumption that the re- 
maining 1,100,000,000 acres of the country, or any large part of them, will 
be found oil bearing. Considerable portions thereof have already been 
drilled for oil or water. It is a certainty that we are learning each year 
more of geologic structure at the hands of * * * geologists, but the 
percentage of dry holes in new exploration is increasing. To assert that 
no new fields will be found would be to deny a very strong law of prob- 
abilities. We may conclude that such fields will be found, but obviously no 
forecast of their importance can be given. 

Improved Methods of Recovery. Estimates of the amount of oil left 
underground vary widely. Oil experts generally believe that no more than 
25 percent of the oil can be recovered by ordinary methods. Some au- 
thorities consider it to be less than one-sixth. During recent years, con- 
siderable investigation and experimentation has been made with different 
methods of forcing out the contained oil with water, air, or gas pressure— 
either directly from the surface or through the proposed method of sink- 
ing shafts and driving galleries. Authorities on these methods believe 
that thereby a second crop from known sands can be obtained as great as 
that already recovered. * * * Such a result would add a total of over 
13 billion barrels to our supply from known fields. It is the impression 
that developments have proceeded so far as to give firm belief in much 
further recovery from the known sands over and above the issued esti- 
mates as to the supplies available through present methods. 

Better Control of Production. There are subsidiary phases of over- 
production which deserve attention, as they lead to economic waste. At 
the initial opening of new fields the gas pressure is strong and the flush 
flow of wells is very large, rapidly diminishing to more settled produc- 

* Only a few weeks after the Oil Board made its report the world’s depth record was 


broken again in that state in the Brea-Olinda or Fullerton Field near Los Angeles. An 
electrically driven rotary bored to 8,046 feet by October 1, 1926. 


266 OILDOM: ITS TREASURES AND TRAGEDIES 


tion, and the opening of new fields is in most instances followed by a fever 
of drilling. Due too often to divided ownership in small areas, the drain- 
age of which is threatened by adjacent. wells, a rush of drilling leads to 
enormous flush flows which temporarily glut the market (pages ~ 76-78) 
and force much oil into fuel consumption, and, through over-releasée’ of 
the gas, diminish the amount of oil that can be ultimately obtained by 
flow and pumping.* 

Not a Monopolistic Menace. The voluntary cooperation proposed 
(namely unit development and production) should include the landowners 
and operators in a single field or pool (a relatively small unit of produc- 
tion), so that the possibility of monopolistic control need not be feared. 
Indeed, cooperative regulation of either the development or the operation 
of a single pool could control but a small percentage of the country’s pro- 
duction. The largest} flush pool in recent years—Santa Fe Springs in 
California—contributed 11 percent to the output in 1923, and no pool con- 
tributed more than 8 percent to the output of either 1924 or 1925. Indeed, 
the three exceptional pools during 1925—Smackover, Long Beach, and 
Tonkawa—together accounted for only 16 percent of the country’s produc- 
tion. Even the flood from the Cushing field at the time of its maximum 
yield in 1914 and 1915 is to be credited with only 17 percent of the na- 
tion’s output in those years when the total yield was but a third of that 
of. 1925. 

Instance of Cooperative Control. The Salt Creek Conservation Com- 
mittee prorated production in 1922 and 1923, reducing the output to per- 
haps one-third of the capacity of the 600 to 700 wells then producing. The 
effect of the committee’s restrictions was a matter of only 8 or 9 percent 
of the country’s production during that period. The question of the coun- 
try-wide influence of such cooperative action on either supply or price 
would, moreover, under any legalized procedure, be always subject to “ap- 

* Control of Flush Flow. The common right of adjoining owners to reduce to possession 
respective oil and gas in the pools tapped by wells drilled on their lands should involve 
some recognition of correlated obligations, so that in the drawing of oil and gas by one 
owner from the common reservoir the producer should recognize the right of the neighbor 
to so much of the oil as is withdrawn from underneath his property, less a reasonable 
allowance for the cost of production, the hazard of the undertaking, and a reasonable profit 
thereon. The right of the State under its police powers to prevent the action of one owner 
from depriving other owners of a common property, and to prevent waste or destruction 
of the common property by one of the owners, seems reasonably clear. 

The right of the State to prevent the waste of natural resources is rendered more im- 
portant in this matter by the newly discovered role of gas in the oil sands. Gas is more 
than a commodity of smaller commercial value associated with the oil; it is the efficient 
agent provided by nature for bringing the oil within the reach of man. Dissolved in the 
oil, the gas makes the oil flow more freely to the well and there forces it upwards. The 
longer the gas is retained in solution the larger is the recovery of oil. Waste of gas is 
therefore a double waste, and the impairment of the gas pressure * * * by one owner 
may prevent neighbors from recovering any of the oil beneath their land * * *. The 
authority of the State to prevent the waste of natural gas * * * applies as well to 
the dissipation of gas pressure without which great quantities of oil would be entirely 
wasted. Geologic science and engineering practice as well as economic considerations of 
waste afford a broad foundation on which to base State legislation. If the several oil- 
producing States should protect property rights in oil produced from a common under- 
ground supply, it undoubtedly would have some effect in the direction of stabilizing pro- 


duction, of retarding development whenever economic demand does not warrant, and of 
making the business of oil production more economical. * * #* 


+ Considering a year’s yield and not the maximum daily production for which Smackover 
‘with about 430,000 bbls. daily in a week of May, 1925, holds the record (Author’s note). 


OILDOM: ITS TREASURES AND TRAGEDIES 267 


propriate and adequate governmental scrutiny,’ quoting from counsel of 
the American Petroleum Institute, “to the end that these owners might not 
be stimulated to undue haste and wasteful competition in the develop- 
ment of their properties and trade, but might have a greater liberty to 
consult the economic conditions of the industry from time to time.”’} 


EXTRACTS FROM ADDRESSES DELIVERED AT THE HEARING OF 
THE OIL BOARD, FEBRUARY 10-11, 1926 


George S. Davison, President Gulf Refining Co.: Disregarding the 
wastes of former years, * * * for the year 1925 full 98 percent of the 
crude was transformed into salable products, though a part of this was 
as a matter of economy used in the refineries as fuel in place of coal. * * * 
Unless restricted by law, the refiner is likely to work up his crude petro- 
leum into products which will bring him the largest net return, with the 
exception that it is generally found necessary to supply customers with 
some products at a loss in order to maintain their patronage for other 
products in which there is a profit. * * * There have been many 
changes in marketing practices. These have been caused by the severe 
competition among the factors in the industry. This same cause will doubt- 
less lead to further changes in the future. Just as those changes which 
have been made have had the effect to better the service and lessen the 
price to the consumer, it is fair to assume that the future changes will 


+ Other Cases of Noncompetitive Control. (1) For a decade, the Cabin Creek Field in 
West Virginia has been an outstanding example of an economical drilling program having 
a definite purpose of high recovery at low cost and at a rate adjusted to demand. The field 
is owned by a single company (Pure Oil) and has been operated as a unit with the definite 
purpose of meeting only the requirements of the company’s refinery and that for the 
longest possible time at the least possible expense. This two-fold aim * * * was 
sought through planning the economic spacing of wells and through conserving the gas 
pressure in the oil-bearing sand. Freedom from the pressure of competition has made possible 
at Cabin Creek a remarkably controlled production curve for the field, bearing little re- 
semblance to the decline curves of other fields. Thus the output from this field was the 
same last year as eight years before. (2) Another example of an oil. pool favored with 
noncompetitive control is Rainbow Bend, in Cowley County, Kansas, where three large 
companies owned only undivided interests in the surface over the pool. This was dis- 
covered at a time of overproduction (in 1923), but in spite of transportation tacilities 
permitting rapid development, wells were put down cautiously, * * * dry holes reduced 
to a minimum, gas was not permitted to escape and reduce pressure, storage requirement 
was kept down—all factors making for economy. Such a pool, though small, acts as a 
desirable reserve slowly drawn upon, since it did not reach its peak of production until 1914 
months, as compared with 114 months for the larger and more spectacular Wortham, Tex., 
pool, where the control was divided into 91 competitive blocks. It was significant that the 
price of crude began to rise just after the crest of the Wortham flood of oil passed, and 
Rainbow Bend slowly attained its maximum output while the price was at its best. (3) 
The Reagan County, Tex., field, a somewhat more productive pool, was controlled by two 
companies (Marland Oil being one), which cooperated rather than competed, with resulting 
conservative rates of development, spacing of wells, and holding back production during 
times of greatest overproduction. The decline in Reagan County pool had not begun 214 
years after its discovery. It serves in a way as a reserve to be drawn on when its output 
is needed and the price compensates the owners. Under such conditions supply is responsive 
to control. (As illustrating the lack of cooperative control the Board refers to the Santa 
Fe Springs Field, which is considered in Chapter XIII, under ‘‘Financial Losses and Con- 
servation.”) Strangely conditions abroad favor conservative development and more com- 
plete recovery of underground oil than in the United States. Mexican examples include 
the Alamo pool, of the Penn.-Mex. Fuel Co., and the Casiano pool, of the Mexican Pe- 
troleum Co. se : 


268 OILDOM: ITS TREASURES AND TRAGEDIES 


also accomplish the same purpose, but I can not see that these changes in 
marketing practices will tend to accomplish the result of conservation 
which the commission is considering. 


Amos L. Beaty, Chairman of the Board, The Texas Co.: Nine-tenths of 
the country’s petroleum production, being drawn from privately owned or 
State lands, the same proportion would seem subject to State laws of con- 
servation. * * * It is true only to the extent that State conservation 
laws are permissible under the Federal Constitution; for property rights 
flowing even from the State itself are protected by the Federal Constitu- 
tion. * * * Should the States legislate the uses to which a particular 
product, privately owned, shall or shall not be put? Assuming, but not 
conceding, that the State could enforce an act forbidding the burning of 
residual oil under boilers, should the State undertake such a thing? I 
submit that it is infinitely better to allow economic laws their play. It 
would be scarcely a step from a legislated use to a legislated price. * * * 
If fuel-oil were withdrawn from the smoke-stack market it would be 
cracked into gasoline. Oversupply and resulting cheapness lead to waste, 
no less in gasoline consumption than in that of other products. One out- 
standing result would be the placement of a handicap upon railroads and 
industries now burning oil and the building up of motor-bus lines and 
other unnecessary competition. The natural trend is strong enough and 
should not be stimulated by legislation. * * * The legislatures of the 
oil-producing States have enacted laws touching many of the subjects 
+ + *, These enactments are varied and far from uniform. * * * 
Public sentiment varies still more. * * * It is not easy to obtain legis- 
lation for the benefit of an industry. * * * Legislators are often 
jealous of State sovereignty and independence, * * * seldom willing 
to follow advice from industrial leaders. They listen, obtain a smattering 
of the subject, then feel prepared to change bills submitted. * * * Year 
after year, in State after State, those conducting business on a nation- 
wide scale find it necessary to attend hearings and go into arguments on 
matters fundamental and known to business men * * * in order to 
prevent serious injury through foolish laws. * * * Not many of the 
States. are interested as much in conservation of oil as they are in its de- 
velopment. States that produce none are anxious to become producers. 
Those producing little are anxious to produce more; to them no argument 
favoring conservation would have a strong appeal. I seriously doubt if 
the great oil-producing States of California, Oklahoma and Texas * * * 
would listen to a plea to hold back production for future generations, 
* * * especially since limitations would mean higher prices. * * * 
It makes but little difference whether the waste is of oil or of money; it 
is to be deplored. Every competitive enterprise involves more or less eco- 
nomic waste; it is to be expected and is unavoidable. The purposes of 
civilization have not wholly failed if people are given remunerative em- 
ployment, even though they are engaged in work which is unessential to 
some extent. But that philosophy should not be carried too far. Millions 
of dollars could be saved by the adoption of proper practice in lieu of ir- 
rational drilling. * * * A proposed measure (to remedy the drilling 
evil) was given final study by the (Institute) committee with the result 
that there was no support for it. It was felt that the owner of a frac- 


a 


OILDOM: ITS TREASURES AND TRAGEDIES 269 


tional drilling site, without expending his money or taking any risk, would 
be enabled to realize as much as if he had done so. This would be unfair 
to the real operators * * * and portions of every oil pool would be 
cut into fractions solely for the purpose of ebtaining this unfair advan- 
tage. It might be * * * feasible to reverse the idea and allow the 
owner of a fractional site to drill upon it, making him liable to those whose 
property should be unduly drained. * * * I would unqualifiedly ad- 
vocate an act to make valid and enforceable agreements among operators 
to suspend competitive drilling operations for given periods. It often 
happens that pools are extended and oil brought to the surface to: be 
dumped upon the market when there is already a large surplus. This oc- 
curs because each producer is unwilling for his neighbor to gain an ad- 
vantage through aggressive development and drainage. * * * The 
greatest good will come through channels other than legislative. Occa- 
sionally legislation may be needed. * * * In such cases it should be 
framed by those expert in the matters involved. *.* * The work of 
this board has greatly stimulated research. Already * * * strides 
have been made, the result largely of interest awakened by the question- 
naire. I have in mind the increased recovery of oil from the sands and 
recovery from abandoned sands. A few—not many—realized how much 
oil is left in the ground and abandoned apparently forever under present 
practices until the President sounded the alarm. * * * It is rather 
shocking to think that with all the brains and engineering ability, with 
all the inventive genius for which our country is renowned, we should be 
unable to recover more than one-fourth of the oil in a stratum under- 
ground. What we are actually engaged in is a mere skimming operation. 
* %* * Opportunities (for improvements) here are enormous, the re- 
ward for success fabulous in amount, and we expect invention on the same 
scale. 


Walter C. Teagle, President Standard Oil Co. of N. J.: (“Fuel Oil and 
Its Influence on Conservation.) In any discussion of conservation the 
public thinks in terms of Government action, new laws, artificial restric- 
tions, or some form of controlled operation in the use of raw materials as 
the only measures for their preservation against future needs. The av- 
erage man fails to realize that true conservation is economical use. Gov- 
ernment action may bring about economical use of a raw material, but 
generally conservation is more certain of attainment by science and eco- 
nomics. Science, through research, improves methods of production and 
manufacture. Economics, through price, creates the market. Price ex- 
pands or contracts production and consumption and is generally the in- 
centive to research. Price is the controlling factor in conservation and 
so the influence of price is paramount in any consideration of the sub- 
porte ,. * 


The price of fuel oil permits its substitution for coal. * * * It has 
been suggested that this use be eliminated by law or change in practice 
which will restrict the production of fuel oil. Such restriction would re- 
sult in higher prices an dwould limit the use. This condition, if due only 
to higher prices, would not of itself be a guarantee that the crude petro- 
leum was being economically used. Two other factors must be consid- 
ered: (1) Whether economical use of this raw material is not being at- 


270 OILDOM: ITS TREASURES AND TRAGEDIES 


tained under existing conditions; and (2) whether an attempt to 
change these conditions by new laws and practices will not raise prices 
of gasoline and fuel oil unduly and thus make the consumer’s cost of the 
limitations on use out of proportion to the advantage derived. 


The petroleum industry has passed through 3 interrelated phases. In 
the first two the value of a barrel of crude was determined practically by 
the price paid for a single product. In the early history crude got its 
value from its kerosene content. With the exception of a comparatively 
small percentage of lubricating oil, the other by-products were negligible 
value factors. The kerosene price governed the price of crude; the dis- 
posal of the by-product—fuel oil—was more important than the amount 
realized. When gas and electricity began to displace kerosene the advent 
of the motor car inaugurated the second phase. Kerosene lost its place to 
gasoline as the product determining the value of a barrel of crude. 
The price realized for the fuel oil continued to be merely incidental. As 
the motor car came into more general use increased demand for gasoline 
was met largely by running additional quantities of crude, increasing to 
just that extent the surplus of the by-product—fuel oil—for which a mar- 
ket had to be secured in substitution for coal. The third phase of the 
cycle of change was reached when the inventive energy of the industry 
was rewarded in 1912 by the commercial utilization of the creacking still, 
which for the first time obtained a major product from a source other than 
crude. This invention and the various processes which materialized dur- 
ing the next few years were limited to the cracking of distillates. * ™ * 
The price differential between gasoline and the fuel-oil value of the fuel 
and high sulphur crudes was the incentive for the further development of 
the cracking processes, perfected within the past two or three years, and 
the industry is thus for the first time in a position to produce gasoline 
from them. Every grade of crude is now a potential source of gasoline. 


What was formerly the by-product—fuel oil—can now be converted 
into gasoline. The effect is the same as if we had found a new raw mate- 
rial from which motor fuel could be made. Another source of supply has 
been created with a lower cost today for the raw material. * * * This 
is a distinct and revolutionary change from the days of a spread of as 
much as 15 cents a gallon between tank-car markets for gasoline and fuel 
oil. Gasoline produced from the initial distillation is, therefore, no longer 
the controlling factor in determining the value of a barrel of crude. The 
price of the by-product—fuel oil—has ceased to be incidental. * * * 
Although the discovery and development of the cracking principle has not 
only revolutionized the petroleum situation but has effected a conservation 
measure of incalculable value, it is doubtful if its significance is as yet 
fully grasped. Cracking has doubled our potential gasoline resources. It 
has proven that with price incentive further progress in the conversion of 
the less valuable products of petroleum into the more valuable is. certain of 
accomplishment. * * * The existence of the cracking process and the 
relatively low price of fuel oil are national safeguards against the uneco- 
nomical use of our crude resources. The inevitable conclusion would seem 
to be that the conservation of petroleum to meet. the See of the future 
depends upon price. jy ale 


~ 


OILDOM: ITS TREASURES AND TRAGEDIES 271 


COMMENTS ON THE -OIL BOARD’S FIRST REPORT * 


I am impressed most favorably.—J. C. Donnell, Pres., Ohio Oil Co. 


’ A broad-minded view—altogether reassuring.—Judson C. Welliver, Di- 
rector of Public Relations, American Petroleum Institute. 


A mass of essential facts * * * covering every phase of the prob- 
lem of the country’s present and future supplies.—Bradstreet’s. 


The most instructive document relating to the petroleum industry ever 
issued in Washingtcn.—Mark L. Requa, U. S. Oil Administrator, World 
War. . 

A good piece of work—the most constructive “investigating” ever exe- 
cuted by a government body.—Petrolewm World of Los Angeles. 

The President’s Board does not reflect upon the Committee of Eleven’s 
estimate of a billion acres awaiting prospecting.—New York Times. 


The opinions expressed are conservative and in favor of encouraging 
legitimate oil development, free from useless state and Federal interfer- 
ence or control.—Inland Oil Index. 


The Oil Board saw its origin in a scare and lives up to it in a scare 
report. But there is nothing that need scare the consumer if the facts 
are carefully examined.—Nation’s Business. 


The report dispels rumors that the board was considering the testimony 
to the effect that drastic methods, probably intervention, would be recom- 
mended to assure adequacy of future supplies. —National Petroleum News. 


The report will meet with general approval. In its emphasis on coopera- 
tion the board avoids dangers incident to impractical compulsory schemes 
destructive to individual initiative—W. S. Farish, Pres., A. P. I., 1926. 


The board has refused to recommend dumping the duty of regulation 
upon the Federal Government, a most welcome and refreshing reversal 
of the tendency exhibited by reform for a generation. Admirable for the 
general principles asserted.—Chicago Daily Tribune. : 


Misinterpretation of some important findings as given in the prelimi- 
nary report is common. A careful review shows that above all there are 
no grounds on which to base the apprehension of an “oil famine.” The 
six-year estimate considers only the measure of the petroleum in present- 
known fields where there are producing wells.—The Oil Trade. 


Report about six years’ supply at present rate of consumption has ap- 
parently been construed in some quarters to mean that the figure repre- 
sented the total available reserve in the ground. This is far from the 
condition existing or the intent of the board. Oil men were rather * * * 
pleased at evident intent of the Government to cooperate with the indus- 
try in its effort to perform efficiently Barron’s. 


The report is very constructive. It indicates a willingness on the part 
of the Government to cooperate with the industry in husbanding present 
resources and to look with approval upon the efforts of the oil companies 
to assure themselves of future supplies by incursions into and exploitation 
of foreign fields. It will be observed that the report speaks of the neces- 
sity of going into foreign oil fields—George H. Jones, Chairman, Stand- 
Grannis. Co.07,N, J. 

The report is a careful, conservative document. It is again made clear 
that the most useful thing yet accomplished has been to set a large num- 
ber of people to thinking about the problems of petroleum and the public. 
If they think wisely and follow up their conclusions with, action, there is 
no great cause for alarm in the fact that the known proved reserve of 
petroleum under present conditions of supply is equal to only six years’ 
demand.—Mining and Metallurgy. 


» * The members of the Board are as happy as boys with: red-topped boots’ because of the 
character of letters it has been receiving from both factions in the oil industry.. Every one 
has been of a commendatory nature.—Staff Special in National Petrolewm News. 


272 OILDOM: ITS TREASURES AND TRAGEDIES 


CHAPTER XII. HUMAN FACTORS AND 
BENEFICIARIES 


“The foundation of business is confidence, which springs from integrity, fair dealing, 
efficient service, and mutual benefit. * * * Hquitable consideration is due in business 
alike to capital, management, employes, and the public.”’—From ‘‘Principles of Business 
Conduct,’”’ by Judge Edwin B. Parker.* | 


THE MEN WHO TOIL AND WIN THE OIL 

No Recent Census of Workers in the Oil World. The number of wage 
earners reported on pages 63 and 83 refer to the middle of 1919 and do 
not include the figures for the “higher-ups.” They totaled 152,011, but 
would easily exceed 200,000 if to the former were added the number of 
accountants, chemists, engineers, economists, foremen, geologists, lawyers, 
managers, salesmen, superintendents, technologists, and numerous others 
who are identified with oildom. The number now directly employed surely 
exceeds 300,000—fully a 50 percent increase in six years. “The Oil Indus- 
try’s Answer’’+ of April, 1924, claims that there are close to 750,000 em- 
ployes in all branches, with 3,000,000 dependents. 

Participants Compared to Players on a Baseball Team. Such a compari- 
son has already been made, on page 66, but. is amplified here. The finders 
—pioneers or prospectors—may be looked upon as the “pitchers,” since 
they start the ball agoing. The drillers and producers become the “bat- 
ters” for they sometimes deliver gushers or “flies,” which in turn mean so 
much for the consumers or “fielders.” <A “dry” or saltwater well may be 
likened to a foul, which, if caught, makes the batter feel “put out.” ‘“Catch- 
ers,” corresponding to the investors, are naturally not so numerous as the 
“fielders” or consumers. The last named are often farthest from the oil 
field as the fielders are most distant from the home base. A safe hit means 
a good strike of oil, and a home run results in a score like the dividends 
- that follow a gusher of high-gravity oil. 

Human Element Intensive, Not Extensive. This element enters more 
intensely into the successful operation of the petroleum industry than in 
that of any other great American industry revolving -around a single nat- 
ural resource. According to the last census (1919), 98,122 wage earners 
in oil and gas produced over $10,000 worth of products per capita, but 
776,569 in coal, not quite $2,000 each. The intensity of production is even 
more manifest in the manufacturing phase of the industry. Thus 58,889 
wage earners in petroleum refining were each credited with $27,340 worth 
of products compared with only $11,640 worth of motor vehicles produced | 
by each one of 148,658 wage earners in that industry (see pages 63 and 88). 
The relatively small number of the petroleum employes and their high 
production per man, whether considering the field or the refinery, is a 
logical result of two outstanding factors: (1) High efficiency of the skilled 
labor required, and (2) the fluid form of the natural substance as well as 
of most of the refined products, which lend themselves to continued mass 
production at comparatively little outlay for man power. At times the oil 
flows under natural pressure from deposits one mile deep or more; and it 


* Formerly of The Texas Company, but now Umpire, Mixed Claims Commission, Wash- 
ington, D. C., and Chairman, Committee on Business Ethics, Chamber of Commerce of the 
United States. 

}{ Published by The Oil and Gas Journal, Tulsa, Okla. It evidently allows for workers 
in. wildcatting, transportation, and marketing. H. A. Matier, in Petroleum World, Jam; 
1906, estimated 45 percent of 250,000 employes engaged in sales. 


OILDOM: ITS TREASURES AND TRAGEDIES 2738 


often runs by either gravity or natural pressure great distances towards 
its destination. After the gas pressure has subsided, a single attendant at 
a central pumping plant suffices for handling the output of a score of 
pumping wells. 

Toilers Intelligent and Labor Troubles Rare. It may be said with cer- 
tainty that in no other important industry does there normally exist so high 
a ratio between the number of educated or skilled “workers and the number 
of common or uneducated laborers. Only during the development period 
of new districts, when much building material has to be handled and many 
pipe lines laid on the surface or in shallow trenches, is there any apparent 
preponderance of untrained employes. The efficient training* of the work- 


fhe Human wer 


that dnves 


~ 


fs The geologist 


The leaseman YOUT Car 


—The Lamp. 


A STANDARD OIL (N. J.) EMPLOYE (AT RIGHT) WITH 40 YEARS’ RECORD OF 
FAITHFUL SERVICE 


In the house organs of the leading oil operators may be read almost monthly inspiring 
chronicles of continuous performance of duty rewarded with retirement on a liberal pen- 
sion and often with concrete expressions of the esteem of their fellow workmen. 


ers in connection with the attractive wages generally paid, their participa- 


tion in earnings through stock ownership (page 288), and the common con- 
tentment of the employes, combine in accounting for the really remarkable 


rarity of strikes and other labor troubles in the American mineral-oil in- 
dustry. Considering the rapid growth of the latter, its high degree of 
Americanization, and its geographic shifting, it is indeed surprising how 
large a percentage of the employes have stuck to their jobs throughout 
_ periods of five years or more. 


* Read “Teach Your Employee to Think,” by C. R. Dooley in The Nation’s Business, 
November, 1924; also ‘‘Business and Human Beings,’’ by F. C. Kelly in the same monthly, 
June, 1922; and “Human Relations in a Great Refinery,” by G. F. Bush of Cosden & Co., 
in The Oil and Gas Journal, January 24, 1924. 


274 OILDOM: ITS TREASURES AND TRAGEDIES 


—The Lamp. 


THE STORY OF THE STANDARD’S TANKS AT BALTIMORE 
View of first tank, bottom finished, side plates going up, after blizzard of January 12, 1922. 


Qualities Characterizing the Oil Country Clan.* Of the field men even 
more than of the refinery workers are required the qualities of courage, 
ingenuity, keenness and unending patience. Their stick-to-it-iveness 
through day and night, frequently under most trying circumstances, has 
helped the oil industry to develop faster than any other big business in 
this country. They, the drillers in particular, are modest men who toil in 
mud and oil-splashed clothes and carry on just a regular affair. They have 
much to contend with, such as bad beverages and “rotten” roads in the 
more unsettled regions. The rule seems to be that the better the oil field 
the more abominable are the highway conditions (see view of Desdemona 
or “Hogtown’’). (This does not apply to Smackover, where heavy oil and 


MUDDY STREET IN DESDEMONA (EASTLAND AND COMANCHE COUNTIES) TEXAS, 
AT AUTHOR’S VISIT, NOVEMBER, 1919. 


*Adapted from The Rig and Reel Magazine, May, 1924, C. A. Metzger, Editor. 


OILDOM: ITS TREASURES AND TRAGEDIES 27& 


RECORD TANK BUILDING AT THE CANTON REFINERY, BALTIMORE 


Laying bottom for another tank two days after the big blizzard of January 28, 1922. 
To store surplus output of Mexican crude during the peak period of 1921-22, six huge steel 
structures were erected in the short time of 64 days, the working time per tank ranging 
from 28 to 301% days. For the complete story of the strong spirit of cooperation, read the 
details by H. S. Coleman in The Lamp, June, 1922. 


heavier soil seem to go hand in hand.) Then there are the other followers 


’ 


of the oil fields such as the tank setters or “tankeys.” By the very nature 
of their calling they must be ready to serve under all conditions of the 
weather—under the blazing sun that makes it hard to handle the hot sheets 
of steel or in snowstorm or sleet that chills and makes movements slow 


and uncertain. (See view of record tank building in winter time.)* 


—The Texaco Star. 


SURVEYING 20 YEARS AGO IN TEXAS FOR PIPE LINE TO THE GLENN POOL 
IN OKLAHOMA 


* “The Oldest Tank Builder in the World’ is the distinction claimed for John Schnabel, 
employed over 30 years by the Petroleum Iron Works of Sharon, Pa. He was born in 
Darmstad, Germany, May 29, 1851, and began tank building at Bradford, Pa., in 1876. 


— 


SiGe OILDOM: ITS TREASURES AND TRAGEDIES 


—Moiniicg wid Met tu. gy 
A PAIR OF PROMINENT PETROLEUM GEOLOGISTS 


Everette Lee de Golyer is president of the Amerada Petroleum Co. and was formerly 
(1909-14) chief geologist with the Mexican Eagle Oil Co. William E. Wrather, like the 
former. was once president of the American Association of Petroleum Geologists. He is 
now a consulting geologist at Dallas, Tex. See pages 277 and 281. 


THE MEN WHO FIND THROUGH WELL TRAINED MIND 


Pioneers Possess Supreme Knowledge. The splendid qualities of the 
tankeys, toolies, line walkers and other worthies would not bring real re- 
sults were it not for the pioneers or entrepreneurs whose foresight and 
insight, as genuine geologists or professional oil men, induce them to say, 
“Here must be oil since surface signs around the soil or cropping rock gives 
us the ctie; so let us drill, and lest we spill petroleum drop in yonder 
slough, pipe line and tank without a stop we’ll rush to build though some 
will deem us dreamy crank.” One case of such uncanny knowledge was 
the Casiano development in Mexico by E. L. Doheny and his faithful, con- 
fident associates (pp. 229-30). Before the first well came in at Cas:ano 
in 1910, in fact before any commercial production was obtained in the 
Southern or Huasteca field, 65 miles of eight-inch pipe line was actually 
laid, steel tankage. was erected near Tampico, and eight large pumps were 
installed in stations.* No similar feat seems ever to have been attempted in 
the United States until late in 1924. Asked one noted authority,y ‘‘Who- 


* See pages 31 and 54-56 in ‘‘Mexican Petroleum,” by W. J. Archer, who described the 
conditions and accomplishments as fdllows: “The simplest food was often hard to get; and 
after a weary day beneath the scorching sun, slowly carving a way through the jungle, 
one’s night was tortured by insect tribes from which no make-shift shelter afforded pro- 
tection. To make a pathway through such territory, untouched for centuries, and without 
knowing what lay ahead, is an acid test of endurance and confidence. * * * Hundreds 
of workers were employed in cutting down trees and clearing away the thick growth. 
Barges were built for crossing three rivers (along the route of the pipe line). Water 
(for steam raising) had to be pumped to the pipe-line stations.’’ 

+ James McIntyre, in The Oil and Gas Journal, December 18, 1924, ‘““‘Wortham a Field 
of Unusual Features.’’ 


OILDOM: ITS TREASURES AND TRAGEDIES 277 


ever heard of an oil company made up of experienced men, building storage 
at a wildcat well with the conviction of it becoming a producer? And 
whoever heard of another oil company starting an offset well to a wildcat 
still drilling—and all on territory condemned by some eminent geologists? 
The Boyd Oil Company did the one and the Magnolia Petroleum Company 
did the other.” The former is merely a ““Nom-de-plume” for Colonel A. E. 
Humphreys and his genial geologist and consulting engineer, F. Julius 
Fohs, to whom references are elsewhere made on pages 70, 145 and 168. 
Brotherly love between big-hearted operators was never so_ strongly 
evidenced as during the remarkably rapid development of this wonder 
field at Wortham, in Freestone County, Tex., late in 1924. 


F. JULIUS FOHS 


Chairman, Petroleum Division, Am. Insti- 
tute of Min. and Met. Engineers, the past two 
years, having succeeded L. De Golyer in 1925. 
Mr. Fohs has enjoyed a romantic career with 
a number of notable discoveries to his credit. 
Few geologists of his age have met with so 
much deserved success. He is, like the author, 
very largely self-taught. He has been very 
widely quoted in this annual publication. 

Along with George Otis Smith Mr. Fohs was 
elected a vice-president of the Am. Inst. of 
Min. & Met. Engrs., February, 1927. Thus, 
with E. L. DeGolyer as its new president, this 
national body has liberally recognized petro- 
leum in the mineral industry. 


Work of the Legitimate Wildcatter. Were it not for this factor who 
often stakes his all, even borrowed capital, on the chance that a random 
hole will yield return, the output of petroleum in a country which hitherto 
has contributed two-thirds of the world’s supply would fall to an utterly 
inadequate figure. The gambling instinct is still the prime motive power 
that lifts most of the oil obtained in the United States.} . It is the specu- 
lative character of the work that appeals to the American. In the quest for 
oil he has unlimited capacity to gratify his desire for quick enrichment.t 
The large producers and refiners, appreciating the value of the speculative 
oil seeker, foster rather than discourage his activities—contrary to state- 
ments made in The Saturday Evening Post.** He absolves them from con- 
‘siderable preliminary expense in drilling and proving a new territory. 
Their work is reduced to purchasing and transporting the raw material 


+ The optimistic wildcatter is that virile pioneer of the oil field who cheerfully takes the 
gambler’s chance in the hope of reaping a reward commensurate with the risk.—M. L. 
Requa, author of “War Service of the Petroleum Industry” in Oildom (formerly a monthly, 
now a daily newspaper of Bayonne, N. J.), April, 1918. 

{ Frederick A. Talbot’s ‘“‘The Oil Conquest of the World,’’ London, 1914. 

** The Literary Digest, August 30, 1924, ‘‘Oil’s Undiscovered Romance,’’ which also 
refers to Edgar B. Davis, a Massachusetts manufacturer who legitimately wildcatted the 
Luling field, now among the first five in Texas. 


278 OILDOM: ITS TREASURES AND TRAGEDIES | 


ES ST TE SR 
COLONEL A. E. HUMPHREYS 
1860-1927 


Like some others who have made a signal success 
in the oil industry, Colonel Humphreys had enjoyed 
experience previously in other branches of the min- 
eral industry, notably on the Mesaba Iron Range in 
Minnesota where the author obtained his first prac- 
tical knowledge of mining. The Colonel was a native 
of West Virginia where, at Charleston, he built the 
Boyd Memorial Church in honor of his mother. He 
now resides at Denver, which is central to his many 
western activities. His name will ever be associated 
with Mexia, Powell and Wortham and with the 
Humphrey’s Foundation for helping the needy. While 
living he gave away four-fifths of a 12%4-million for- 
tune. His sad death on May 8, 1927, was due to an 
accidental gunshot. 


when it is tapped. It is a development which is peculiar to the United 
States. In other oil-producing countries such a tendency is not supported.* 
Except in rare instances, such as the Gulf Refining and Vacuum Oil at 
Lockport, La‘ in 1924; the Shell Company at Long Beach, in 1921, and the 
Union Oil Company of California at Santa Fe Springs in 1921, and in 
Colorado, 1923-1924, have large corporations been the discoverers of new 
pools or fields. They are generally found by individuals, such as M. L.. 
Benedum, E. B. Davis, E. L. Doheny, A. E. Humphreys, E. W. Marland, 
Thomas B. Slick, Waite Phillips, Oscar R. Howard, and the late Neil 
Esperson, or else by groups of tenderfeet at the game. ) 

A Preeminent Pioneer in Discovery and Development.j The man who 
found more oil fields in America than anyone else and who directly or 
indirectly brought more than a billion barrels of oil above the ground, 
began prospecting for minerals at the early age of seventeen when he left 
school in Wisconsin and took to the west. While still in his ‘teens he 
trapped and traded with the Indians; and before Obregon was born he 
penetrated into Mexico in search for mineral wealth. Later on he located 
in California, and thirty-four years ago he became interested in petroleum. 
He produced the first oil in Los Angeles and pioneered the Orange County 
fields. Twenty-five years ago he was commissioned to find liquid fuel for 
a Mexican railway. He. explored Peruvian oil fields in the nineties. In 
such prospecting he proved much more successful than the world dean of 
mining engineers who heads an oil company of his own. 

A man of pronounced Christian character, the subject of this brief sketch 
never gambled, never touched a playing card and never tasted tobacco or 
intoxicants; and this in a region notorious for miners’ saloons and gambling 
dens. He always kept himself clean of habit, person and speech. From 
contact with the Indians he acquired that wonderful sixth sense, ‘‘orienta- 
tion.” He is direct and straightforward in his speech, which is without 
doubtful or double-meaning words. Although he never gambled on the 
turn of the wheel or the tumbling of the dice, he has never looked upon the 
mining of oil as anything but his own legitimate business. He believes in 
oil and in its service to man; that handled in a large way petroleum per- 


*Frederick A. Talbot in “The Oil Conquest of the World,’’ London, 1914. 
+C. W. Barron’s “‘Helping the Government,” in The Wall Street Journal, February 20, 
1924; abstracted and supplemented by the author. 


OILDOM: ITS TREASURES AND TRAGEDIES 279 


forms the greatest human service with the narrowest margin of profit, and 
that its market as well as its service is always sure no matter how elusive 
the liquid may be in its native lairs. John D. Rockefeller was always a 
merchandiser seeking markets around the world for products made out of 
mineral oil. He will always be remembered as the world’s foremost re- 
finer and the first billionaire to be born. Edward Lawrence Doheny was 
always a miner, wrestling with nature, and never sought markets for oil 
when he could sell to manufacturers or merchandisers at a modest profit. 
He will always be remembered for his Cerro Azul, his fuel oil so essential 
in the winning of one war, and his patriotic persistence in completing naval 
facilities for the prevention of another war. 

The “Rock Hound” as a Real Factor. A geologist in general is a scientist 
who is versed in the various subjects that deal with the composition and 
structure of the earth’s crust, the forces which continually cause changes 
therein, and the ancient life of the earth as revealed in the rock record. 
The petroleum geologist is an applied scientist who with the aid of geologic 
theory, surface signs, cores and cuttings, logs of wells and map studies 
discovers and outlines the particular structures which may contain oil or 
gas or both. His nicknames are numerous, for he was at first ridiculed by 
the drillers and others, and these and other intimates now call him “rock 
hound,” “ridge runner,” “mud smeller” or “pebble pup.” If anything he is 
cheerful and even facetious despite many discouragements to his profession. 


VERNON F. MARSTERS 


Mid-Continent petroleum geologist, who has made many 
oil examinations in South America, notably in Peru. 
See Chapter X, also proceedings of the Am. Institute 
of Min. and Met. Engrs. 


RALPH ARNOLD (RIGHT) 


One of the distinguished ‘‘graduates’”’ of the 
U. S. Geological Survey, Dr. Arnold has spe- 
cialized in California petroleum. He is a 
graduate of Leland Stanford University, a 
classmate of H. C. Hoover. 


280 OILDOM: ITS TREASURES AND TRAGEDIES 


The essential qualifications of an oil geologist is ability to interpret 
Nature’s indelible imprints in the bedded or stratified rocks, mountains, and 
valleys, the minor forms of fossils and the minute mineral particles. A 
thorough knowledge of geologic conditions in any new field will in large 
measure reduce the hazards and result in immense savings of money and — 
effort. (See pages 12, 40 and 42, 47 and 65).+ | 

Oil Geologists Observe What Others Overlook. Observations made by a 
geologist differ decidedly from those made by a driller, a warehouseman, 
or even a financier. This power of professional viewing is well set. forth 
below by a fellow geologist.t. “For example, look out of the window where 
you are sitting; what do you see? Now ask your companion to look out 
of the same window; what does he see? Compare notes and you will be 
surprised that he, looking at the same objects, has noticed things that you 
have overlooked. Why? You are a driller, say, so you observed that the 
well in the foreground was drilling rotary with the tools out of the hole; 
that there were eighteen stands in the derrick, indicating the depth, and 
that they were getting ready to run in. 

“Your companion is the warehouseman on the lease. Did he see that 
rig and note what was going on? Not he, for the first thing that he 
observed was the overshot on a passing truck that he had not been able 
to locate that morning for the tool pusher. Both of you therefore saw 
the things in that picture that directly applied to the type of work repre- 
senting your major interest. The artist, had he also seen that view, would 
no doubt have been wondering if he could make a picture of oil field 
atmosphere that he would be proud to initial. All this leads up to the 
fact that the geologist must be able to see things that Nature presents 
and then interpret to the best of his ability, what those expressions 
indicate.” | 


+ There still exist many misconceptions among executives as to a geologist’s real func- 
tions, and so the profession suffers undeserved criticism. It is generally (and wrongfully) 
supposed that a geologist should be able to predict with certainty the exact spot where 
commercial deposits of petroleum may be found. If he fails to give such positive and 
definite predictions, the confidence of the executive is shaken in the whole science of geol- 
ogy. It should be realized that the most important function of the geologist is to advise 
us as to the places where we can not successfully prospect for oil and thus, by a process 
of elimination, save us many costly mistakes. * * * The p. geologist finds himself 
dealing with two related lines of activity; the one being correlation work within proven 
areas and the other being exploration work in wildcat areas.’—A. C. McLaughlin in ‘‘Ge- 
ologist Has Earned Place in Oil Industry,” an address before the Am. Assn. of Petroleum 
Geologists, Los Angeles, October, 1923. This authority, just quoted, was a geologist before 
becoming an executive. 

The accomplishments of the chemist in the refining end of the industry must not be 
ignored. Space permits mere random reference to the three B’s: A. P. Bjerregaard, with 
the Empire Refineries, Inc.; Col. G. A. Burrell, president, Burrell Oil. and Gasoline Co., 
Pittsburgh; and W. M. Burton, president, Standard Oil Co., of Indiana. The second named 
found the Government helium supply during the war and helped recover gasoline from 
natural gas. The last named is noted as the inventor of a cracking process (page 107). See 
Ou and Gas Journal, January 31, 1924, ‘‘Refinery Chemist an Important Factor,’’ by H. T. 
Bennett, of Cosden & Co. 

Doctor Burton is one of the most distinguished graduates of Western Reserve and Johns 
Hopkins. He became a chemist for the Standard of Indiana in 1889 and six years later 
was promoted to general superintendent. He was vice-president, 1915-1918, and since 1918 
has been president of his great company. Doctor Burton was awarded the Willard Gibbs 
medal by the American Chemical Society in 1918, and the Perkins medal by the Society of 
Chemical Industry in 1921. 

£C. R. McCollom in Union Oil Bulletin, August, 1923. 


OILDOM: ITS TREASURES AND TRAGEDIES 281 


LADDERS TO LEADERSHIP 

Geologists and Engineers Elevated to Executives. The oil industry— 
more than the Government and the public—is quick to recognize the worth 
of the technical worker. His education is broad and exacting; his duties 
develop further definite knowledge, careful reasoning, and good judgment 
together with diplomacy and fair-mindedness in dealing with his sub- 
ordinates. No wonder his value is appreciated through his advancement to 
better paid positions requiring executive ability and thorough training. 
Among instances of such promotions may be mentioned the cases of Carl 
Beal, vice-president, Marland* of California; E. DeGolyer, vice-president, 
Amerada Corporation; E. T. Dumble, vice-president, Rio Bravo Oil Com- 
pany and dean of western petroleum geologists; F. Julius Fohs, vice-presi- 
dent, Humphreys-Boyd Oil Company; James H. Gardner, president of a 
Tulsa Company; and, farther down the alphabetical line, A. C. McLaughlin. 
vice-president, Amalgamated, Associated and Pacific companies. Not to be 
overlooked is W. W. Orcutt, vice-president, Union Oil of California and dean 
of California oil geologists.** 

The last named founded the geological department of his company and 
later had also charge of engineering, at the time the author served as one 
of his assistants. Mr. Orcutt has a quaint way of answering your query 
about a particular area to the effect that he “feels this is pretty good terri- 
tory.” He “felt” Santa Maria, Richfield, Santa Fe Springs, Dominquez and 
Rosecrans, but he was naturally annoyed a little when derricks began to 
destroy the scenery around his handsome home in the Montebello suburb of 
Los Angeles. Rest assured that his ‘‘feel” was not related to the forked 
stick or other would-be witchcraft, but was backed by countless hours of 
field work, a wonderful store of technical learning, and the application of 
everyday simple “horse sense.” As a result, the Union Oil Company of 
California has been highly successful, not only in California but also’ in 
Colorado, Texas, Wyoming and foreign fields.* 

* “Marland holds a unique position among the small as well as the large producers on 
account of the excellence of its geological department.”’ C. A. Shively, N. Y. Evening Post, 
January 24, 1925. 

** DeGolyer was in 1925 succeeded by Fohs as chairman of the Petroleum’ section, 
American Institute of Mining and Metallurgical Engineers. Gardner became president of 
the American Association of Petroleum Geologists in the spring of 1924, following Max 
Ball, who is president of the Marine Oil Company, of Denver, Colo. Valentine Garfias, 
former associate of Ralph Arnold, is manager of the foreign department of H. L. Doherty 
& Company. W. A. J. M. van der Gracht (page 44) is president of the Marland Company 
of Texas. Read ‘“‘The Petroleum Executive and Geology” by J. H. Jenkins, chief geologist, 
Tidal Oil Company, in The Oil Weekly, December 23, 1922. 

“Graduates”? from the Geological Survey have distinguished themselves in private enter- 
prise. To a few of these references have been made in Chapter XI. Ralph Arnold is a 
classmate of Secretary Hoover and noted for his reports on California geology. Messrs. 
Ball and Beal (see above) are both former U. S. G. S. men. Other ex-Survey geologists 
include C. F. Bowen, chief g., Standard of N. J.; F. G. Clapp, of the Associated Petro- 
leum Geologists; Everett DeGolyer, pres., Amerada Corp.; Alex. Deusen, v. p., Marland 
Oil of Texas; A. E. Fath, chief g., Vacuum Oil; C. A. Fisher, consulting g., Denver; F. 
Julius Fohs, still (1926) chairman, Pet. Division, A. I. M. E.; H. S.° Gale, cons. g., Los 
Angeles; J. H. Gardner, producer, Tulsa;-C. J. Hares, chief g., Ohio Oil Co.; K. C. Heald, 
staff g., the Gulf Companies; E. B. Hopkins, cons. g. (Venezuelan oil), New York; O. B. 
Hopkins, chief g., Imperial Oil (of Canada); Robt. T. Hill, cons. engr., Dallas; J. A. 


Taff, chief g., Pacific Oil; C. W. Washburne, cons. g., New York; C. H. Wegemann, chief 
g., Pan American (Eastern). 

* According to The Wali Street Journal, February 14, 1925, the Union Oil Company of 
California profited $22,000,000 in 1924. Of this, $10,700,000 was net for the stock after 
deductions for return of capital, and was 25 percent larger than in 1923. Inventories of 


crude and refined oils, aggregating 23,500,000 barrels, were worth alone $35,000,000 at 1925 
prices. 


282 OILDOM: ITS TREASURES AND TRAGEDIES 


Lawyers Likewise Become Leaders. Not all the captains and mates of 
the oil industry work their way up from the crew or the engine room, for 
some were lawyers before they entered the legitimate oil industry. But-the 
percentage is much smaller than, for instance, in the case of Congress, the 
membership of which is made up of more than 65 per cent of attorneys, 
an altogether unfair preponderance from one profession. Brilliant brains 
with legal training find the oil industry very attractive although litigations 
are not nearly so numerous as in metal mining whereof the land laws are 
comparatively complicated. Among prominent attorneys who have special- 
ized in the practice of petroleum law may be mentioned Frederic Kellogg, 
former law partner of ex-Secretary Hughes, and now with the Pan Ameri- 
ean Petroleum & Transport Co.; “Judge” Charles E. Kern, now the Wash- 
ington correspondent of the leading American petroleum journal; and 
Judge Edwin B. Parker, long counsel for the Texas Company but since 1923 
the American commissioner and umpire, Mixed Claims Commission, United 
States and Germany. It is quite true that knowledge of law alone does not 
qualify a man for high executive position in the oil world. Invariably, like 
the engineers and geologists who are advanced to administrative jobs, the 
lawyer must be balanced with common sense and leadership ability, as il- 
iustrated below. 

Four Very Able Attorneys Now Active Administrators. Colonel Robert 
W. Stewart was a farmer boy in Iowa before he practiced law in South 
Dakota and became a State Senator. As a major in the “Rough Riders” 
he fought under Roosevelt. Since 1907 he has been successively promoted 
from general attorney to general counsel and to chairman of the board, 
Standard Oil Company of Indiana. He has popularized his company with 
its employes perhaps more than any other man (see Stockownership by 
Employes). E. W. Marland, president of his company, was a country law- 
yer in Pennsylvania before moving to Oklahoma. His beautiful home and 
his company’s headquarters are located in Ponca City in the heart of the 
high-grade pools of the Mid-Continent. Frederick H. Wickett is chair- 
man, board of directors, Pan American Eastern. At the age of 21 he be- 
came assistant attorney for the old Chicago & Northern Pacific Railway 


_W. F. RITTMAN, Chemical Engineer 


As research engineer with the Bureau of Mines 
investigated conditions applying to the cracking of 
heavy oil for the manufacture of gasoline and also 
cf benzol-toluol used in explosives manufacture. 

He is now head of the Commercial Engineering 
Dept., Carnegie Institute of Technology. 

Doctor Rittman is also well known as a consulting 
engineer to the petroleum industry. 


OILDOM: ITS TREASURES AND TRAGEDIES 283 


Co. He entered the oil business in 1916 when he organized the Dixie Oil 
Co. in Louisiana. Amos L. Beaty became attorney for The Texas Com- 
pany in 1907 and in 1920 succeeded the engineer, E. C. Lufkin, as president 
of that. great independent.* On account of ill health, the latter retired 
from the chairmanship of the board and was relieved by Judge Beaty in 
March, 1926, the presidency being taken over by R. C. Holmes. 


The Engineer and the Human Element.** In mining it has already been 
found that the best man for manager is he who has had engineering train- 
ing. Managers up from the office, the purchasing department, or the 
transport department may make good, but not so good as those who have 
had technical training. A manager must needs speak the language of his 
staff. While the capitalists realize this, the engineers on their part have 
just begun to see, during the last few years, that mere knowledge of ma- 
chines and of Nature’s forces is not sufficient. The human side of engi- 
neering is all-important. Executives from the highest down to the lowest 
should understand something of psychology and the handling of men. The 
whole idea of a successful foreman has entirely changed in twenty years. 
No longer is that foreman great who can lick anybody in his gang. Indus- 
try now wants the foreman (and the engineer) who gets his men to work 
not for him but with him. In other words, cooperation can be classed with 
conservation and standardization as a forward step in procuring and main- 
taining prosperity in the petroleum industry as well as in the mineral indus- 
try at large. 

TREASURE OR TRAGEDY? 


The Driller, Despot of the Derrick. Foremost among the human factors 
attending the success or failure of an oil well is the man who manipulates 
the drill. Within his realm lies the power to ruin the well he is drilling. 
This may be done through carelessness, neglect, inexperience, or even 
deliberate intent if he harbors a grudge against his employer. But usually 
his whole soul is wrapped up in the problem of “making hole” or finding 
oil in behalf of his backer. The life of a driller is a hard one and only a 
man physically strong, mentally alert and spiritually courageous can “carry 
on” as he must do for a long time in 12-hour shifts or “‘tours.”}+ The suc- 
cessful driller at a standard rig has mastered the technique to control the 
bit or drill operating at the end of a cable which may extend from a few 
hundred feet to more than a mile below the floor of the derrick. This 
man must meet all kinds of emergencies. The arduous life which he has 
to lead is forcefully set forth by a reputable writer. What is said in the 
following quotation applies as well to the driller’s able assistant—the 


* Partly abstracted from The Nation’s Business, November, 1924. The modesty of Mr. 
Marland is reflected in the fact that his biography is conspicuously absent from ‘‘Who’s 
Who in America.’”? The brief biography of E. L. Doheny fails to bring out the fact that 
he studied law during leisure time and was admitted to the bar many years ago; also the 
fact that he surveyed boundary lines in Oklahoma long before its oil industry was born. 

** Abstracted from article by J. Parke Channing in Mining and Metallurgy, May, 1923. 

Probably now the most noted engineer among oildom’s executives is Geo. S. Davison, - 
president of the Gulf Refining Co. His popularity is further evidenced by his election, in 
1926, to the presidency of the Am. Society of Civil Engineers. 

+ About the middle of 1925 the Standard Oil Company of New Jersey inaugurated the 
8-hour shift and others quickly followed. This means that the largest Standard Company 
must employ 500 more men. 


284 OILDOM: ITS TREASURES AND TRAGEDIES 


toolie—the tireless trouble-shooter, ambitious to become a driller without 
undue delay. 


A Leaf from a Driller’s Diary.* Called at 11 p. m.; sleepily turned out 
of a hard but warm bunk; joined at the bare board table by other drillers 
and tool dressers. Quietly quaffed weak coffee and ate fat meat and soggy 
bread.** Used to rough surroundings, always at the front, pioneering a 
new field. Rough work and plain food was their portion, and to their 
credit they never kicked. Strode the driller along in the darkness, 
whistling as he went. He knew this land and this life which he loved so 
well. He had tagged the goddess of fortune from the hills of Pennsylvania 
to the far corners of the earth. He had frozen a foot at Fort Norman and 
in Rangoon was bedridden with fever. Luck had failed him, yet he never 
whimpered. He was a sticker and a man—this driller. He was a big man 
with iron-gray hair and with eyes that looked unafraid at the universe. 
The driller stood on his stool, hand on the temper-screw. Delicately at- 
tuned fingers felt what was happening 38,000 feet below—whether the bit 
was biting into hard sand or soft shale. He panned out some screw. The 
walking beam kept up its steady “plaint’”—up and down. 


Fortune or Failure. They pulled tools and bailed out. The driller 
scooped up some sludge, then shook his head, for it did not look or smell 
like oil. Drilling again towards daybreak, one more screw would tell the 
tale. Impatiently the owner waited, pacing about the derrick floor. Slowly 
the tools were pulled to the top. The bailer was run, and again the driller 
examined the sludge. He answered the frantic question in the owner’s 
eyes: “Dry as the bunkers o’ hell!” The owner gasped; he wrung his 
hands. He had dropped his last dollar and all he could beg and borrow. 
Though there was no money for paying the crew, the driller neither swore 
nor protested. He had drilled once for himself and knew how the owner 
felt.¢ - 


Hazards and Heroes. The loss of a month’s wages is the least of the 
limitless risks run by a driller when a dry test is completed. Sometimes, 
as the contractor, he is induced to take half his pay in shares of what may 
prove a profitless venture. The coal miner escapes from such participation 
but when it comes to a question of fatal and non-fatal accidents he has a 
lead over the oil field and refinery workers with an annual death toll rang- 
ing from 2,000 to 2,800. Unhappily, and with the exception of under- 
ground coal mining, the oil business has more physical hazards to the 
square yard than any other large industry. The bodily risks pertain to 
(1) construction, of derricks in particular; (2) drilling operations, as in 
handling. heavy tools; (3) bringing in wells, involving possible demolition 


* Slightly modified from an article by H. Botsford in Oil Trade Journal, August, 1923. 

** As a matter of fact, the modern driller is not satisfied any longer with the plain 
“grub”? of the good old days. Most operators now vie with each other in their various 
camps in catering to their faithful field men. 

+ The author, too, has shared a similar feeling for he has helped to pay for three ‘‘dry”’ 
tests in Texas and one rather recently—over 4,500 feet deep—in West Virginia. Such 
losses are compensated, however, when oil or gas is found, for the consumer must pay for 
the dry wells as well as‘for those producing. 

= During the past 15 years; equivalent to a death rate of 3.78 to 5.54 per 1,000 300- 
day workers. The corresponding rate in California oil fields varied from 1.29 in 1917 to 
2-42 in 1923, 


OILDOM: ITS TREASURES AND TRAGEDIES 285 


of derrick, blowing out of drill stem and bit from hole, explosion of gas, 
or burning of oil; (4) ignition of oil in storage tanks, especially by light- 
ning; (5) asphyxiation from fumes in- cleaning out land tanks, tank cars 
or ships’ tanks; (6) welding pipe lines with acetylene; (7) casinghead 
plants; and (8) refineries. 


References are made to a few spectacular cases where hazards to humans 
have been involved. One of the most fatal if not the costliest of catastro- 
phies in the history of the petroleum industry happened near Corsicana, in 
Navarra County, Tex., in May of 1928. The Hughes-McKie gusher in the 
Powell field then came in, spouting 5,000 barrels of oil and about 2,000,000 
cubic feet of gas. While getting the flow under control the gas ignited, and 
instantly the oil stream changed into a seething, fiery monster.* Only five 
of the eighteen men at the well were able to escape with their lives. Just 
how the gas caught fire is not definitely known; it was likely not due to 
the baneful cigarette—the meanest menace around a well or a refinery. 
The conflagration was finally conquered by a method originated in Mexico 
and afterwards used in various places, as at Pelican Rapids, 165 miles 
north of Edmonton in Alberta.** Exceptional heroism was displayed not 
only at this disaster but at many other fires in oil fields. Even without 
fires bravery is brought into play, especially in capturing wild wells. A 
group of American heroes like those who jailed the giant Cerro Azul south 
of the Rio Grande is shown on page 232. “Happy” O. P. Yowell was the 
Long Beach forward in a fight of “Ten Men Against a Geyser of Oil,” 
which occurred in California about four years ago.t In May, 1924, M. M. 
Kinley flew from Tulsa to the Cromwell field in an overloaded airplane with 
18 quarts of gelatine which he used in snuffing out a burning gasser rated 
at 32,000,000 cubic feet.t 


WELFARE WORK AND COOPERATION 


How Big Oil Companies Care for Employes.§ All corporations are nat- 
urally interested in any kind of welfare work that will redound to their own 
advantage. Truly, one cannot conceive of any effort expended for socio- 
logical betterment but what eventually brings bountiful returns to the 
benefactor, directly or indirectly. It is characteristic of the petroleum 
industry that its corporations as well as individual operators take a 
decidedly human interest in all who serve them without arousing that 
resentment with which some mining companies once had to contend. Per- 
haps this difference in appreciation is due to the fact that there are rela- 
tively fewer suspicious foreigners employed in oil fields and refineries than 
in mines, mills and quarries. Americans realize that they receive merely 


* “The Hughes Corsicana Gusher,’ The Rig and Reel Magazine, July, 1923. (See also 
April, 1924.) 

** “Recapping Wild Well Tests Nerve and Ingenuity,’ Engineering and Mining Press, 
September 29, 1923. 

{ Literary Digest, March 24, 1923. 

+ “Courage, Gelatin and an Asbestos Suit,’’ The Oil and Gas Journal, May 22, 1924. 

Read also “Fire and Explosion Hazards of Petroleum and Petroleum Products,’’ Serial 
No. 2400, September, 1922, by Messrs. Katz and Smith of the Bureau of Mines; ‘‘Safety 
in the Petroleum Industry,’”’ by H. Foster Bain, The Oil Weekly, December 9, 1922; “Pro- 
mote Safety and Reduce Time Losses,’ shows what a cigarette did and tells about the work 
of the Texas Safety Council in The Oil Weekly, February 6, 1924. 

§ Partly abstracted from an article in ‘‘The Oil Weekly.”” See Union Oil “Bulletin,” 
Jan., 1925. 


—Rig and Reel 


THE HOUSING PROBLEM IS HAPPILY SOLVED BY THE OPERATORS 
The lowest scene is in Zacamixtle, Mexico, showing a thatched hut. 


OILDOM: ITS TREASURES AND TRAGEDIES 287 


a square deal—not charity to partly replace wages or salaries, or to pre- 
vent merited increases therein. Company care for employes is manifested 
in many ways that make for economy, efficiency and real prosperity. 


Annuities are based upon length of service, 20 to 30 years being required 
with 65 years as the retirement age, and $300 as the least annual payment, 
average earnings being a controlling factor. Life inswrance is paid to 
dependents commensurate also with the salary of wages and the period of 
employment; and to entitle them to a sum equal to a year’s earnings the 
deceased must have worked not less than five years and in the case of some 
companies, as long as 10 or 15 years. In this connection there have been 
formed, at some of the larger refineries, mutual benefit associations one of 
which early in 1924 had $35,000 to its credit. Compensation for accidents 
is now commonly provided directly by the companies themselves at con- 
siderable saving.* Sick benefits are usually confined to free medical atten- 
tion and hospital treatment, but some companies go so far as to furnish 
visiting nurses and calls by the physicians to families of employes. The 
Standard of California has even built a sanitorium for tubercular patients 
at Colfax where the climate is favorable. To further the health of its men 
in isolated places another company uses a traveling bath wagon. Most 
companies provide pure food at little more than cost, and one concern has 
established a cafeteria. Recreational advantages vary from swimming pools 
to fully equipped club houses with libraries, like the one the author found 
at Ebano, original headquarters of the Mexican Petroleum Company, 40 
miles west of Tampico. Few industries take greater pains to encourage 
education among employes than the oil industry. This takes different 
forms such as traveling libraries, house organs, occasional lectures or 
movies, evening classes for foreigners and technical instruction for selected 
employes. Day schools for children have been built and maintained in 
out-of-the-way places. 


Industrial Representation in the Standard Oil Co.t The labor policy of 
the Standard Oil Co. (New Jersey) is founded on paying at least the pre- 
vailing scale of wages in the community; on the eight-hour day, with time 
and one-half for overtime; one day’s rest in seven; sanitary and up-to-date 
working conditions; just treatment assured each employe; payment of acci- 
dent benefits beyond the amount prescribed by the State compensation law; 
health supervision by a competent medical staff; payment of sickness bene- 
fits after one year’s service; cooperation with employes in promoting thrift 
and better social and housing conditions; and assurance for a generous 
annuity at the age of 65, guaranteed for life after 20 years of service. 
Most of these features have been a part of the company’s policy for many 
years, but it is only during the past two years that the cooperation of 
employes in determining these matters has been definitely assured through 
industrial representation. 

Industrial representation, in the Standard Oil Company, is a principle 


* Abstracted from A. R. McTee’s article in The Oil Weekly, February 9, 1924, ‘“‘Oil 
Companies Show Saving by Carrying Own Liability Risk,’’ by J. C. Chatfield in National 
Petroleum News, March 19, 1924. 

7 As typical of what the thoughtful operators do for their employees read ‘‘Humble 
Office People Have Own School,” by W. V. Gross in The Oil Weekly, November 7, 1924. 

~ By Clarence J. Hicks, New York, N. Y., in Mining and Metallurgy, March, 1920. 


288 OILDOM: ITS TREASURES AND TRAGEDIES 


rather than a procedure. Representatives of employes and representatives 
of management evolved a simple plan, the basis of which is that it gives 
every individual employe representation at joint conferences on problems 
and fundamental principles affecting all those interested in the industry. 
Experience has definitely shown that representatives of the employes are 
not only alert for the employes’ interests but are as keen as the represent- 
atives of the management in determining and insisting upon fairness to 
the employer. The plan was brought into operation by an invitation to 
employes to cooperate in maintaining the company’s policy. 


STOCK OWNERSHIP IN OIL COMPANIES BY -EMPLOYES AND 
CUSTOMERS 


Mutual Treasures with Tragedies Unknown. Men buy stock in com- 
panies they trust. They try to protect companies in which they own stock. 
And when the company whose stock they buy and own is the one for which 
they work, then we have evidence of the two finest characters in industry 
—an employer deserving of confidence, and a worker who is keen about his 
job. Warren S. Stone, bank president and president of the Brotherhood of 
Locomotive Engineers, said: “The saving power of American workmen is 
so great that, if they would save and carefully invest their savings, in ten 
years they could become one of the dominating financial powers of the 
world.” The idle prophets of warfare between capital and labor are daily 
being confounded, and they don’t know it. If there is any class war, it is 
between the Realists and the Ranters, and it is merrily going on right 
now. You know who is winning—the workmen themselves!* 

Extension of Employe Stock Ownership. To encourage thrift all the 
larger oil companies have introduced plans for stock purchase and owner- 
ship by all workers. The general rule permits the employe to invest part 
of his salary, never more than one-fourth, in company stock each month. 
Practically all the operators popularize the plan by investing half as much 
fcr the employe as he invests for himself. One prefers to let the workers 
pay on installments and in the meantime draw the dividends with which 
to help meet the payments. As of December 31, 1924, 14,100 employes of 
the Standard of New Jersey were credited with 587,287 shares of common 
stock having a market value of $24,600,000 on February 1, 1925. This 
amount is exceeded only by the holdings of John D. Rockefeller, Jr., 
Northern Finance Corp., Rockefeller Foundation, Harkness estate, and 
General Education Board.+ Since Col. R. W. Stewart became the directo- 
rate chairman of Standard, Indiana, the number of stockholders has ad-. 
vanced from 4,600 to almost 20,000, chiefly through employes’ purchases. 
In four of the company’s plants 70 per cent of all the workers were re- 
cently stockholders. No single shareholder in Standard of Indiana owns 
over 10 per cent of its capital stock. In 1916 the Union Oil Company of 
California inaugurated profit-sharing (without actual stock-ownership). 
Since then about $5,000,000 has been disbursed, $800,000 of which was paid 
to 6,000 employes out of the 1924 net earnings. General Petroleum initi- 
ated a similar plan at the end of 1920; the Magnolia Petroleum Co. early 
in 1924, and many other companies in California, Texas and elsewhere have 


i} 


* With the exception of the last three words, this is part of an editorial by Merle 
Thorpe in Nations Business, March, 1925. See Arthur Pound’s story in The Independent. 
+ Wall Street Journal, February 2, 1925. Stanolind, September, 1923. 


OILDOM: ITS TREASURES AND TRAGEDIES 289 


oe Se ma 


OUTING OF THE TEXAS CO.’S EMPLOYES AT SCHUETZER PARK, ALBANY, N. Y. 


The following towns were represented: Saratoga, Waterville, New York City, Hudson, 
Cobleskill, Schenectady, Gloversville, Ft. Plain. 


done likewise. Thus, in The Texas Co., nearly all in positions of impor- 
tance and many in minor places own shares. Their holdings grow larger 
every year, and frugal ones look forward to retirement upon comfortable 
income from this source. Stock ownership makes for unity of effort and 
purpose; and it increases the number of sentinels who will not go to sleep.* 


On February 24, 1926, about $40,000,000 worth of stock was delivered 
by the Standard of N. J. to employe-subscribers who had been saving regu- 
larly to pay for it. That makes for happiness, freedom and prosperity. 
In the spring of 1926 about 42 percent of the capital stock of the Standard 
of Indiana was owned by 15,722 employes. Chairman Stewart thereof says 
that all the directors of his company may some day be elected by the vote 
of employes. Under a new plan, Standard of Indiana contributes 50 cents 
for each dollar subscribed for stock purchase by employes. See “Wall 
Street Journal,’ March 6 and May 14, 1926. 


Customer Ownership of Stock in Oil Companies. Detailed data regard- 
ing the extent of customer ownership in petroleum enterprises are not. 
yet available. It is very likely that the practice is more common in non- 
oil industries. But with every American considered a consumer or buyer 
of petroleum products it may be said in general that every shareholder 
in an oil company is a customer of that or some other oil company. But 
the reverse, of course, is not true, particularly when customer ownership 
is considered to be confined to the purchase of stock only in the company 
or companies with which each buyer deals directly in procuring his petro- 


* The Texaco Star, May, 1923, editorial by A. Lefevre. See also “What Do Employes 
Want,” by D. A. Callaway, June, 1924, page 16. According to The Wall Street Journal 
of January 22, 1925, The Texas Co. has allotted to employes almost 80,000 shares at $35 


for the year 1925. This is under market value, indicating that the company contributes 
substantially. 


290 OILDOM: ITS TREASURES AND TRAGEDIES 


leum supplies. However, a survey has just been completed showing that 
stockholders in a leading group of basic industries increased by 3,500,000, 
or virtually doubled, between January 1, 1918, and January 1, 1925. This 
related to 528 corporations, many of whom belonged to one branch or 
another of the oil industry. Of the great increase, almost equal to the 
population of California, 500,000 were estimated to be employes, 1,000,000 
customers, and .2,000,000 investors drawn from the general public.* 


THE SERVICE OF GREAT FORTUNES t 


For the heights by great men reached and kept 
Were not attained by sudden flight; 
But they, while their companions slept, 


Were toiling upward in the night.—Anonymous. 


The Two Richest Men the World has Ever Known Compared With Others. 
They are the two who have accomplished the greatest material good in the 
world, and they happen to be at present alive and in the enjoyment of good 
health. No fortune in England or Europe, either by income, capital account, 
or landed wealth, ever approached the millions that are under the name of 
Ford or Rockefeller. Judging by income, Lord Iveagh, the brewer, is 
probably the richest man in Great Britain; but his fortune is hardly half, 
and possibly only one-quarter, that of either Ford or Rockefeller. In 
shipping circles some give second place in the line of wealth to Lord Pirie, 
the ship builder, with an estimated income of £3,000,000. He is one of 
the shrewdest business men, and it is said he is building every ship for 
oil burning. In general, however, shipping people will tell you that the 
-richest man in England is Sir John Ellerman. He is not only a skillful 
ship operator but he is also a large owner in the London Times. | 


A British Engineer Founded the Foremost Crude Oil Producer. If a 
census of rich men of England could be taken it would astonish people to 
find Lord Cowdray ranking very near the top. Here again it is service— 
world-wide service—that brings the return. More than 30 great engineer- 
ing feats stand to the credit of Cowdry around the world, from the Penn- 
sylvania tunnel under the Hudson and constructions at Vera Cruz and 
Tehuantepec to large enterprises in Egypt. The world seems an economic 
unit with Cowdray. He expanded the Mexican Eagle in Mexico until it 
ranked as the biggest oil producer in the world. When it had a value of 
more than $100,000,000 he let the Royal Dutch and Shell people have it to 
round out their enterprises. He is now building the great Makwar Dam 
on the White Nile, of which nearly nothing is heard in America but, which 
is almost as important as the famous Assouam Dam. While waiting for 
England and France to join hands and demand that he build the Dover 
tunnel he steps over to California on a pleasure trip and quickly inspects 
not only the Grand Canyon of the Colorado but Los Angeles and the whole 
Pacific coast to British Columbia. 


— 


* Survey by B.S. Binkerd of the Academy of Political Science, according to The 
(Washington) Evening Star, March 9, 1925. 

+ Written by C. Ww. Barron, the leading financial authority, on his return from London. 
and reprinted in the Boston News Bureau, Jan. 26, 1928. Lord Cowdray died in May, 1927. 


OILDOM: ITS TREASURES AND TRAGEDIES 291 


LATE OCTOGENARIANS—OLDER THAN OILDOM 


Lives of Oil Men Oft Remind Us We Can Lengthen Our Lives, Too. 
There must be something medicinal about the oil business, since so many 
of its members attain a ripe old age. Perhaps petroleum serves as a 
germicide as well as an insecticide (page 123); or perhaps the longevity of 
so many oil men is due to their living in the open, away from the polluted 
air and the congested streets of our American cities; or probably they 
have healthy habits, enjoying hard work and partaking of plain food, 
leaving liquor and cigarettes largely alone. 


“Far from the maddening crowd’s ignoble strife 
Their sober wishes never learned to stray.” 
—Gray’s Elegy. 


At any rate, one can not help but notice among the necrologies appearing 
in oil periodicals that the men who make their mark in this industry almost 
invariably reach a ripe old age. William Rockefeller was in his eighty-first 
year when he died in April, 1922. His more famous brother entered his 
eighty-seventh year on July 8, 1925. He governs his appetite and prefers 
to walk and wield a golf stick rather than ride to excess in a “gas wagon.” 


Lyman Stewart Lived Over Eighty-three Years. To this late leader of 
the petroleum industry in California the author, a former employe of the 
Union Oil Company of California, has properly dedicated this volume (see 
frontispiece). Mr. Stewart’s connection with the oil industry antedated 
that of John D. Rockefeller by more than two years. But fortune did not 
come to him quite so fast. His career was one of continuous struggle, in- 
termingled success and failure, with triumph attended in later life. A less 
resolute man would have been crushed by the reverses and hardships whick 
were the lot of Lyman Stewart particularly after leaving Pennsylvania 
and locating in California. He and E. L. Doheny deserve more credit than 
any other two men in putting California on the petroleum map. A monu- 
ment to Mr. Stewart’s memory is the big Bible Institute on Hope Street 
in Los Angeles. 


Dr. Bridge Helped to Place Mexico on the Oil Map. Early in 1925 there 
passed away a prince of patriots. A nature’s. nobleman was Dr. Norman 
Bridge. A cleaner or more courageous man never lived. In order to rid 
himself of tubercular trouble he gave up his active professorship at Rush 
Medical College in 1901, at the age of 56, and spent his winters there- 
after on the Pacific Coast. In 1906 he became one of the several associates 
of K. L. Dcheny in pioneering the Southern or Huasteca fields in Mexico, 
making it possible, ten years later, to provide an ample supply of fuel 
oil for the allies. During the World War he acted as chairman of the 
National Enemy Relief Committee at Washington. Dr. Bridge served 
three years as president of the Chicago Board of Education and was 
otherwise widely interested in the dissemination of knowledge. He gave 
$600,000 to the California Institute of Technology* while living. The bulk 
of his estate, valued at almost $8,000,000, will eventually be equally divided 


_.* Defended in June, 1911,.by the author from an attack in a mining journal. Doctor 
Bridge was then a member of the Board of Trustees of this institution then known as 
Throop” and presided over by the distinguished James A. B. Scherer. 


292 . OILDOM: ITS TREASURES AND TRAGEDIES 


among five institutions. These include the universities of Chicago and of 
Southern California. In an address delivered December 6, 1921, Mr. Doheny 
said of Dr. Bridge: “His beaming intelligence, faith in his associates, 
cheerful and equable disposition made him an invaluable companion and 
business associate.” Like Franklin Knight Lane, Dr. Bridge was a vice- 
president of the Pan-American Petroleum and Transport Company at 
the time of his death. 


EXTERIOR OF THE — 
MELLON INSTITUTE OF 
INDUSTRIAL RESEARCH 


This was established in 
honor of the late father of 
the Secretary of the Treas- 
ury. It is operated in con- 
nection with the University 
of Pittsburgh and _ offers 
many opportunities to scien- 
tific workers. 


INSTITUTIONS ENDOWED FROM OIL DIVIDENDS 


Mellon Millions Establish Industrial Research. The Mellon Institute of 
Industrial Research and School of Specific Industries is housed in a Greek 
temple adjoining the University of Pittsburgh, built by Andrew W. Mellon 
and his brother Richard B. as a memorial to their father. The idea 
originated in 1907 with Dr. Robert K. Duncan, of Kansas, who became its 
first director. The wide scope is indicated by the fact that there are 52 
different fellowships with 81 scientists at work. Baking and laundrying 
are among the many arts given attention. The Institute contributed two 
things to the winning of the war: gas masks and toluene for making 
TNT (see page 59). 


- Rockefeller Riches Benefit Innumerable Institutions. The gifts of John 
D. Rockefeller and his son for the uplift of humanity approximate to 
date the huge sum of $600,000,000. -Carnegie and Frick, both steel mag- 
nates, have given respectively $350,000,000 and $85,000,000; Hershey, $60,- 
000,000; Eastman, $58,600,000; Mrs. Russell Sage, $40,000,000; Duke (the 
tobacconist), $40,000,000, and Henry Phipps, $31,650,000. The Rockefeller 
Foundation alone has dispensed over $80,000,000 in all parts of the world 
for preventing disease and plague. It fights malaria in South America, 
hookworm in India and our southern states, yellow fever in the Panama 
Canal Zone; tuberculosis in France, and typhoid wherever it may appear. 
Its head is Dr. George E. Vincent. Then there is the Rockefeller Institute 
for Medical Research of which Dr. Simon Flexner is the director. 


OILDOM: ITS TREASURES AND TRAGEDIES 293 


THE PEOPLE WHO PROFIT FROM PETROLEUM 


The Beneficiaries of the Oil Industry are not alone the employes on 
the one hand nor the Cowdrays, Fords and Rockefellers on the other. 
Millions of people of modest means enjoy in some way the fruits of efforts 
and funds spent in the search for, and the production of, petroleum. The 
Osage Indians in Oklahoma, and white and colored farmers there and in 
other States are recipients of bonuses and rentals before their lands are 
tested and of royalties after oil has been struck. The leasers and specu- 
lators do not always receive the lion’s share. The operators and stock- 
holders are supposed to get great dividends, and often they do, but still 
oftener they do not. The greatest and steadiest beneficiaries are those 
who in one way or another utilize the products in the forms of gasoline, 
kerosene, fuel oil, paraffin and lubricants (see pages 58 and 94). Consumers 
of the 300 or more products obtained from petroleum include all classes of 
people. 

The Farmer is Probably the Biggest Beneficiary, for, aside from what 
lessors’ income he may have, his labor is lightened, his time is saved and 
his pleasures multiplied much more than any other great occupational 
group since he is not only the most numerous but as an individual a more 
varied consumer than the city dweller. The latter, for instance, rarely 
illuminates his home with the kerosene lamp and does not always preserve 
foods as the farmer’s wife does, with the aid of paraffin wax for sealing. 
Oil burning equipment has increased his capacity for raising crops (see 
page 20), trucks quickly take his perishable produce to nearby markets, 
and his family enjoys better church and school facilities than formerly (see 
page 128). | 

Mankind Mounting Higher With the Help of Mineral Oil. But the 
banker and the bricklayer are likewise benefited though in fewer respects. 
The metal miner now pays less for paraffin candles than he formerly did 
for the tallow illuminant. Petroleum oils, ointments and lotions find a 
place in our hospitals and homes for soothing the suffering. Operators of 
_ all kinds of machinery—dynamos, elevators, gas engines, hoists, locomo- 
tives, lathes, power plants, airplanes, cranes, drills, steam shovels and 
ship’s engines—could not turn a wheel without lubricants of many kinds 
derived from petroleum (see pages 94-97 and 123). In fact, modern civili- 
zation and industry such as we know it, simply could not exist without the 
products of mineral oil. Who, after all, is the real beneficiary of the oil 
industry if it is not civilized mankind? Do the benefactions stop even 
here? No, indeed; for savages and the semi-civilized share in its showers 
of blessings through their material, mental and spiritual uplift brought 
about by the agents of commerce (Chap. VIII), of mercy (page 5), and of 
missions which are more or less fostered or financed with the private for- 
tunes made out of mineral oil. 

Security Holders Not Even Second Fiddlers. Crities of the socialistic 
kind look upon the “bloated” bondholders and stockholders as a class most 
substantially supported by the oil industry. This is not true, although some 
individuals receive greater returns through stock ownership than the highest 
officials get income in salary form. There appears to exist an inexorable but 
unpublished priority rule in the distribution of gross income as there should . 
be in the quality of consumption (page 95). First come the lessors or land- 


294 OILDOM: ITS TREASURES AND TRAGEDIES 


owners; next come the wage earners and the dealers in equipment and sup- 
plies; third come the salaried officials with the smallest percentage of all; 
fourth come the bondholders who are non-existent as far as the net earnings 
above fixed charges are concerned; and fifth and finally come the holders 
of preferred and common stock. The last group get their share of the 
gross income only at the small end of the horn after it has been succes- 
sively shrunk and given the names of “net income,” ordinary net profit, 
net after depletion and depreciation, net after taxes, and net available for 
dividends and surplus. ; 


Statistics of Stockholders—Widening Ownership the Outstanding Fea- 
ture. The ever-expanding public ownership in large American corpora- 
tions has been characterized as “a peaceful economic revolution.”* The 
movement has gathered momentum mostly since 1920, although beginning 
during the war. It has manifested itself in two directions, towards cus- 
tomer ownership and towards employee ownership (see below). Two in- 
stances are cited to illustrate the recent diffusion of securities, one among 
smaller and one among larger concerns. On April 10, 1920, the Ventura 
Consolidated Oil Fields, a California operator with New England capital, 
had 1,116 stockholders. On April 16, 1923, it had 2,872 stockholders, mak- 
ing a three-year increase of 150 per cent. Similarly, in three years, the 
Sinclair Consolidated Oil Corporation multiplied its number of share- 
holders from 20,660 on August 31, 1920, to 40,549 on August 31, 1923, a 
gain of nearly 100 per cent. To show how numerous are the individuals 
interested in some of our leading American corporations the following 
figures are given as representing the number of stockholders at the end of 
1923 or the beginning of 1924: 


Bell Telephoney iis ret cals See he 485,000 Standard: ‘of: Noi Jdstih i eee ee 61,490 
DurantuMotars ee ao ees nee ewcnane 300,000 Standard: of (Calif: .{ 523) seee ee 10,904 
Am. Telephone: iis oon sales tgatone aie 281,149 Sinclair: 0/3. 3255 Goel an eee ene 40,549 
USS: Steel: Corpencweones., see 154,230 Fhe. Texas: Cos.s 22 Se eee 30,000 
General Motors i oe ee ee 68,281 Union’ Oiltof-Califi:2 3 faa 4,000 


Standard Oil Bulletin of May, 1923, reported 10,904 as the number of 
its stockholders as of December 31, 1922, the same as the number of em- 
ployes participating in profits, with $9,234,741.50 to their credit as invested 
in the company’s capital stock. There were either more than 10,904 stock- 
holders altogether or there were fewer than that many participating em- 
ployes. 


Opulent Osages, World’s Wealthiest Tribe. “Oil fortune does not draw 
the color line.** For years the Osage Indians were nomads, merely wards 


* Prof. T. N. Carver, of Harvard, quoted in the Washington Star by M. S. Rukeyser, 
who writes that ‘“‘the development of the huge corporate enterprises wiped out many 
smaller, weaker, one-man organizations of an earlier generation. The new crop of 
American youths is finding its opportunity more and more in jobs rather than in their 
own businesses. The salaries offered at the top are often far beyond what might have 
been earned as independent operators.” 

+ Standard of New Jersey reports this number in addition to 12,928 subscribers to 
employes’ stock acquisition plan. 

i The Wall Street Journal of July 15, 1924, reported 5,000 persons owning Union Oil 
and Union Oil Association stock. 

** The black man as well as the red man shares in the showers of blessings that follow 
the finding of oil in land which he may own. He may even help to discover new pools 
as was the case with the negro hunter, Joe Tillman, whose observation of gas seepages 
7 miles southwest of Lake Charles near the Gulf Coast led to joint development by the 
Gulf Refining Co. of Louisiana and the Vacuum Oil Co., in 1924 (page 25, Washington 
Star, Nov. 4, 1924). See also The Rig and Reel, August, 1922; Washington Times, June 
4, 1922, ‘‘Where Negroes are Made Millionaires in a Day.” 


OiLDOM: ITS TREASURES AND TRAGEDIES 295 


of the masterful white man. From the Far South they trekked to Kansas, 
and finally, by the grace of government, settled in Oklahoma. On their 
reservation the Burbank and other oil fields were brought in, and a golden 
flood literally dropped into the blankets of the red men. They are today 
the wealthiest people per capita on the globe. If Alexander Pope had 
known about them he might easily have changed his famous line so as to 
read, ‘Lo, the rich Indian.’ Each one of the 2,229 surviving members of 


THE CAPITAL OF INDIAN OILDOM, PAWHUSKA, OKLA. 


Oil development in the Osage Country during the past ten or twelve years has resulted 
in tremendous transformations. Pierce-Arrow cars now course over paved streets where 
Indian ponies once galloped over poor trails, and stately structures stand where picturesque 
tepees recently reared their slender poies. 


the tribe had a minimum income of $12,000 in 1923. One of them, Mary 
Elkins, received $103,000 as her share that year. She happens to be the 
last surviving member of her family and inherited the rights of all her 
kin.”+ During the fiscal year ended June 30, 1925, the entire tribe drew 
$29,422,000 from royalties and bonuses on oil and gas leases, making $13,- 
200 per capita. Beginning with the first fiscal year (1905) in which out- 
put exceeded 100,000 bbls., the total yield from the Osage reservation to 
the end of June, 1926, approximated 325,000,000 bbls. of petroleum in ad- 
dition to large quantities of natural gas from which much gasoline was 


~ Marcosson’s ‘‘The Black Golconda,’ page 139. See also Chapter VII, ‘‘Oklahoma 
the Hub” or p. 10, Saturday Evening Post, April 12, 1924. Copyright by Curtis Publish- 
ing Co., but book published by Harper & Bros., 1924: (Price, $4.00). This able writer, 
referring to the roll call of Osagé tribe members at midnight on December 31, 1906, 
which established the “head-rights,’’ wrote: ‘‘By this time the Osages had some inkling 
that their (rocky) land was valuable. They were eager to have as many head-rights 
in the family as possible. * * * + QOne boy born at 11.50 on the last night of 1906 
was named ‘Johnny-on-the-spot.’ A luckless girl baby who came into the world half 
an hour later was dubbed ‘Mary-too-late.’ Yet some people contend that the American 
Indian has no sense of humor.’’ Read also “Early Days in Burbank,’’ by Wm. Ash Waid, 
chief inspector, Osage Agency, in Oil and Gas Journal, November 27, 1924; poem, ‘‘The 
Osage,” by Harry Walker, M. D., in ‘‘Souvenir of Pawhuska,’”’ by Mesdames B. Leahy, 
M. Leahy, I. C. Beaulieu, and K. Woodward (about 1911), copy of which the author 
procured through the courtesy of the banker, H.’H. Brenner of Pawhuska, on his visit 
there, October, 1925. 


296 OILDOM: ITS TREASURES AND TRAGEDIES ° 


recovered. To the end of 1925 these Indians had received over $100,000,000 
in the form of bonuses alone from the auction sales at Pawhuska besides 
royalties on production. Their total income to date from oil and gas (out 
of the 36 percent oil bearing part of their 1,500,000 acres) must be $225,- 
000,000 more or less. 


INTERIOR OF LABORATORY, MELLON INSTITUTE 
Industrial chemistry is the long suit of this ‘well-endowed school (see text). Mankind 
in general is its beneficiary. 


NEITHER POLITICS NOR NEPOTISM 


Duties of Directors as Department Managers. When early in 19238 there 
came up before the Senate Subcommittee the question of why substantial 
salaries were paid to members of the directorates of gasoline producers, it 
implied that these men were overpaid for appearing merely at board meet- 
ings and that such “extravagance” was a potent factor in formulating 
price increases of motor fuel. Such accusations seem not to be supported 
by facts. In the case of the Standard of New Jersey, the aggregate salary 
of its executives made no more than one forty-second of a cent in the 
price of every gallon of petroleum products. According to its house organ,* 
the research work done by well-paid experts and their bettering of busi- 
ness practices have effected economies of greater good to the consumer than 
any benefits brought to the former. Apparently the word “director,” as 
applied at least to Standard Oil executives, is a misnomer, for each member 
of the board manages a department which in itself is a business of big 


* The Lamp, edited by Northrop Clarey. 


OILDOM: ITS TREASURES AND TRAGEDIES 297 


proportions. Thus the director} responsible for marine interests is the 
head. of the largest American shipbuilding concern. Moreover, he is in 
charge of the seventh largest steamship interest in the world, and his com- 
pany is the only one flying the American flag to appear in Lloyd’s Regis- 
ter among the forty largest steamship companies in the world. 

Correct Conception of the Training and Responsibility of Directors. 
Instead, therefore, of being a person possessing much moneyed interest in 
the corporation, reviewing its affairs at board meetings, but taking no 
part in its actual administration, a director in any one of the leading 
American oil companies is a full-time specialist who not only directs but 
manages as well. He brings to bear upon a particular phase of the busi- 
ness the knowledge and ability which he has gained only through many 
years of arduous apprenticeship at a moderate salary. He has gained his 
high position in competition with many others; in truth, it may be said 
that the more successful oil companies manufacture their own executives. 
Four of one board began as junior clerks and three as manual laborers. 
One was a telegrapher, one an office boy, one a tank-wagon driver and one 
a salesman. Such men have no incentive of partiality, stock ownership, 
or personal or financial consfderations for acting in behalf of commercial 
units other than his own, thus belying the common accusation that the 
several Standard Oil companies operate “in cahoots.” 

Why Oil Executives are Well Rewarded. They are paid salaries far in 
excess of the average earnings of capable men in order to prevent waste 
and extravagance. It is generally known that the Standard of New Jersey 
finds a use and market for every one of the hundreds of derivatives of 
petroleum; that even the odor of gasoline in its refineries has long ago 
vanished, converted into more gasoline, into other power, and into rare 
chemicals; that the business of this particular company, like that of many 
others, is not conducted by new or inexperienced employes, but that a life- 
time of service is the usual thing and not the exception, and that in spite 
of the hazardous nature of the business, accidents and injuries are very 
few and the refineries run for years without serious fires. 

High-minded Men Direct the Destiny of Oildom, and yet malicious minds 
are trying to blacken the reputation of big men in the business. As hu- 
mans, they each have their drawbacks but not in degree greater than go 
with the leaders in other lines. Oil men are generous to a fault, fearless in 
doing their duty, and exceedingly popular with their employes since the 
latter believe sincerely in the former’s sense of fair play. If the leaders 
were low-minded, and the rank and file disreputable fellows, how could such 
a fine character as the late Franklin Knight Lane, member of Wilson’s war 
cabinet, have identified himself with the American petroleum industry? 
As it was, he gave up his great work for the Government and became vice- 
president of the Pan American Petroleum and Transport Company. 


WHAT THE OIL MEN DID TO HELP WIN THE WAR 
Cooperative Committee of Leading Oil Men. A stirring story is told by 
Isaac F. Marcosson in Chapter X of the “Black Goleonda.”* It relates to 
oil in the World War and pays particular tribute to the Cooperative Com- 
mittee on Oil of the Advisory Commission of the Council of National De- 
fense which played such a momentous part in tipping the scales of victory. 


* Copyright by the Curtis Publishing Co., and published by Harper & Bros., New York 
7 John G. Pew, see pages 88-89. 


TREASURES AND TRAGEDIES 


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OILDOM: ITS TREASURES AND TRAGEDIES 299 


ropean supply of petroleum products, despite drastic conservation steps 
taken in Britain, France and Italy. Automobiles were allowed to operate 
only on urgent business. 

Oil Supplies Sold at a Sacrifice. “That the American oil industry met 
this emergency at great sacrifice is something the world now knows. * * * 
Perhaps the best summary of its part in the war was conveyed in a tele- 
gram of Capt. Paul Foley, U. S. N., to the National Petroleum War Serv- 
ice Committee (as the original committee was known after M. L. Requa 
was made chief of the Oil Division of the U. S. Fuel Administration): ‘No 
military operation of the Allies on sea or land, under the sea or in the air, 
was ever interrupted by the lack of petroleum supplies.’ * 


“A vital change was worked in the American oil industry while we were 
at war. A new principle was brought into play—cooperation in place of 
competition for profits. * * * There is no more outstanding fact in 
the industrial history of the war period than the stabilization of prices for 
petroleum products at the time of an eager and crying demand for them. 
It was not only close coordination on the part of the: oil industry with the 
Government, but equally close cooperation within the industry. The oil 
business was the only great industrial enterprise dealing with a vital and 
necessary war product that the Government did not take over and fix 
prices. This tells the whole story.” * * * (Mr. M. referred to eight 
gasoline-less Sundays which helped to conserve huge supplies for over-sea 
shipments and which were instituted east of the Mississippi.) 

A. P. I. an Aftermath of the War. “This inspiring story of cooperation 
did not end with peace. The experience born of war-time coordination was 
too vaiuable to lose and the machinery too useful to be scrapped. The in- 
dustry had never before experienced even a semblance of organized na- 
tional unity. The decision was therefore reached to perpetuate it in the 
form of the American Petroleum Institute organized in April, 1919, as a 
trade association dedicated to the service of the petroleum and allied activ- 
ities. The Institute is not an association of oil companies because a com- 
pany, as such, is not eligible for membership. It is an organization of oil 
men residing in the United States, Canada and Mexico.’’§ 


§ “Merchant Mariners Did Heroic Part in Great War.” tells how Standard Oil fleet 
lost 10 steamers, The Lamp, August, 1919; read ‘“‘Worked Together to Win World War” 
(referring to Standards and independents) in Oil and Gas Journal, June 14, 1923; 
“Lord Northcliffe and the Standard Oil Company,” The Lamp, October, 1922; ‘“‘Petroleum 
Institute Stands as Monument to A. C. Bedford,’ by V. B. Guthrie, Nat’l Petroleum 
News, September 23, 1925; “Mr. Bedford in the War.” by Mark L. Reaua before the 
Los Angeles meeting of the A. P. I., January, 1926, printed in The Lamp, February, 
1926. Alfred Cotton Bedford was not quite 61 when called bevond on September 21, 
1925. With his clean, correct living he should have lasted at least 10 years longer. On 
no other industrial leader devolved so much responsibility in winning the war. When 
the author saw him in May, 1925, Mr. Bedford betrayed no physical suffering: but he 
had really sacrificed himself already for his country. In an address before a_ section 
of the Am. Inst. of Min. Eners., January 21, 1921, partly printed in Mining & Metal- 
lurgy, March, 1921, Ralph Arnold said: “When the stress of war demanded the best 
brains to handle that vital factor in the attainment of victory, petroleum, it was due 
to the efficient handling of our oil supply that we were enabled to take care of our own 
needs and a large part of our allies’ as well. * * * The importance of Mr. Doheny’s 
Mexican production during the war can not be overestimated; it furnished a large part 
of the fuel for the American and British navies. This most important asset to the American 
petroleum supply coming from a foreign country as the result of private enterprise and 
energy, should be ‘sufficient proof of the wisdom of a definite policy.”’ 

+ This committee was formed as the result of a call. March 22; 1917, on President 
Bedford of the Standard (N. J.) by B. M. Baruch, revrerenting President Wilson. Members 
afterwards added: J. H. Barr. R. D. Benson, H. M. Blackmere, M. J. Byrne, M. Carey 
A. P. Coombs, J. S. Cosden, W. P. Cowan, G. W. Crawford, B. G. Dawes. H. L. Doherty, 
J. C. Connell, W. S. Farish. H. E. Felton, F. Haskell. A. G. Maguire, V. H. Manning. 
S. Messer, J. E. O’Neill, J. Howard Pew, Edw. Prizer, R. W. Stewart, W. C. Teagle. and 
R. L. Welch. ; 


ITS TREASURES AND TRAGEDIES 


OILDOM 


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OILDOM: ITS TREASURES AND TRAGEDIES 301 


CHAPTER XIII—FINANCIAL SURVEY AND INVESTMENTS 


“Organized industry means something different from a system aiming at quick and 
enormous profits. It is based on a definite theory of scientific effort whereby all the 
possibilities of a given resource are developed to their fullest degree so that waste ceases, 
the value of the labor is increased to the worker’s benefit and the consumer receives the 
blessings of nature’s dower at the lowest reasonable cost.’’—Victor Ross. 


A BIRD’S-EYE VIEW OF THE BIG OIL BUSINESS 


Financial Success Essential to Its Existence. Prospects of profits in- 
variably induce corporations and individuals to venture into a business or 
to establish an entirely new industry. An operator’s usual objective is 
long life and steady income which is quite consistent with the above ideal- — 
istic expression quoted from “Evolution of the Oil Industry.” Ford may 
represent the one extreme, but Drake certainly did not drill the first com- 
mercial oil well just for the fun of it. Rich reward would have been his 
had he but found a ready market for mineral oil. If the price of gasoline 
and behind it the price of crude petroleum be forced down to a profitless 
point for most producers and refiners, it may compel the closing of 250,000 
wells yielding an average of one barrel or less per day. In order to main- 
tain itself the industry must prosper. It must earn enough for capital 
return, current dividends, lean years and losses, as well as for the annual 
drilling of 25,000 new wells. 


Living Costs Higher Without Help of Oil. Were it not for the numerous 
oil or gasoline-driven cars, trucks, tractors, irrigation pumps and other 
farm equipment, the cost of food would soar much higher since the farmers 
are becoming relatively fewer and farm labor is growing more expensive 
than in the past (page 20). Bonuses and royalties paid by oil companies 
have prevented farm abandonment during drought periods. Many isolated 
mines and small factories would be inoperative were it not for the several 
convenient and economical sources of power supplied by petroleum. Fishing 
vessels find their cruising radius greatly increased by gasoline power and 
thus are assured catches otherwise missed. 


Good Roads Financed by Gasoline. Upwards of $1,000,000,000 a year is 
being spent in the United States on road improvement. The country has 
500,000 miles of paved or surface roads with 40,000 miles added annually. 
While this work is of economic value to the whole population, the direct 
benefits are enjoyed by motorists, and it is no more than just that they 
should contribute to the cost. As a matter of fact, automobile license fees 
and gasoline taxes provide 65 per cent of the enormous sum needed.* But 
the gasoline tax is paid directly by the petroleum industry which acts as a 
collector for Uncle Sam. 


What Oil Has Done for Texas. From next to nothing in 1901, the oil 
industry of the “Lone Star State” has grown so extensively that there is 
now invested therein the huge sum of over $1,250,000,000, according to 
President Farish of the American Petroleum Institute. In 25 years this 
business has brought into Texas probably more new money than all 
others combined. For bonuses and leases about $70,000,000 was paid in 
1925. Pay rolls of the oil companies approximate $90,000,000 annually. 


* Editorial in The Philadelphia Record, Aug. 26, 1926. 


302 OILDOM: ITS TREASURES AND TRAGEDIES 


About 400,000 Texans depend directly upon petroleum for a living. Re- 
fineries near Beaumont and along the Houston ship canal run to stills fully 
100,000 barrels more crude oil than is produced in the state. Of the total 
state taxes over 40 percent is derived from this industry. 


California and Oklahoma Second and Third in Capital Outlay. If number 
of producing oil wells were the only criterion, then Oklahoma would have 
about five and one-half times as much as California invested in oil. But 
the Pacific coast state leads all in the cost per well and in refining capacity. 
It has, moreover, marine equipment naturally lacking in the inland state 
and marketing facilities fully three times as valuable owing to the much 
higher registration of motor vehicles. Oklahoma due to its numerous pools, 
has a pipe line mileage exceeding those of Texas and California combined. 
It leads all states in the investment in plants for recovering gasoline vapors 
from gas wells and oil wells. Altogether, the petroleum industry in Cali- 
fornia has absorbed probably more than $1,000,000,000+ and in Oklahoma 
almost that much. 


Capital Expenditures Elsewhere.—Accurately to allocate the 10 to 11 
billion dollars tied up in the oil business of the United States is quite a 
problem. Pennsylvania is still ahead of Oklahoma in the number of live 
wells, is third in pipe lines, and probably accounts for six or seven percent — 
of the total investment. Kansas, fifth in number of wells, has taken about 
three percent. New Jersey, without any wells but with her big Bayonne 
and other refineries, many filling stations and marine equipment, has taken 
about the same percent of the total. Other important states in only ap- 
proximate order are, Ohio, Illinois, New York, West Virginia, Wyoming; 
Indiana, Kentucky, Arkansas and Louisiana.* Capital invested in Canada’s 
refining alone was $50,600,000 in 1925;¢ total, including wells, probably 
more than $100,000,000. 


Financial Influence and Integrity Now Recognized. Outside of the Stand- 
ard Oils the operators at times have been obliged to act almost as almoners. 
Even after the advent of the auto with its voracity for petroleum products, 
some of them had to beg for buyers of their securities in competition with 
stock sellers for fly-by-night affairs. Gradually the oil industry grew in- 
dependent and largely financed itself out of its surplus funds. Particularly 
thrifty have been Gulf Oil, various Standards and The Texas Co. On 
July 2, 1926, the market value of the issued shares in all the Standard Oil 
companies approximated $4,410,000,000 compared with little more than 
one-seventh as much in 1911 when the trust was dissolved. The high 
‘character of the men in charge, notably the late A. C. Bedford, has helped 
to beget confidence in the strength and stability of the companies them- 
selves. Both bankers and the Federal Government have altered their at- 
titude towards this big business. Oil men aid in directing the destiny of 
the biggest banks and they are often consulted on affairs of state. 

Forms in Which Assets Are Found. Taking ten and one-half billions as 
the value of the physical resources of the entire industry at the middle of 


+ Equal to the assets of the Chase National Bank in New York or to half the sum now 
spent in the United States each year on amusements alone. 

*See recent article in The Oil & Gas Journal by Chas. E. Bowles and C. O. Wilson, 
and in Oil Trade by H. J. Struth. 

~ Canadian Bureau of Statistics. 


OILDOM: ITS TREASURES AND TRAGEDIES 303 


X 


1926, it is found that this huge sum may be segregated as follows in round 
percentage figures: 


Lands, leases, 300,000 produc- 150,000 tank cars, 10,000 bulk 
ing wells and their equip- stations, 30,000 filling sta- 
PIEMONTE Ag ts fark fe teres as ve. e435 tions, 280,000 curb pumps, 

85,000 miles of trunk and gath- BU ate Meats cloneene Sea -w ie cr ate 8 
ering pipe lines with pump Steel tankinge, concrete reser- 
stations, and 500 tankers, voirs, etc., with 750,000,000 
Ste On Crude Ol. << fees G8 Bb bbls. capacity containing 

600 refineries with 2,000 crack- 425,000,000 bbls. crude oil 
units; 1,100 natural gasoline and 80,000,000 refined prod- 
SENSO ae NC A a Sa me oO MCLs Une ol 4LOeG. ne. aes 13 


The $4,500,000,000 invested in the production branch of the business is 
but little less than the money in circulation, or about one-tenth of the 
value of the farms and farm buildings of the United States. The assets 
of the refining end (about $2,500,000,000) approximate in value those of 
the U. S. Steel Corporation. In the relatively new business of condensing 
natural gasoline from its vapors, about $225,000,000 represents the plant 
investment which amounts to half against as much as is yearly spent on 
college and university education. ‘ 


ad 
wad 
ana 
aae 
ina 
aan 
aus 
aan 
aak 
aaa 
Vaal 


= Standard Oil Bulletin. 
AN OILDOM OFFICE BUILDING TOWERING ALOFT LIKE A DERRICK 


Investments of the oil industry in buildings of all kinds must well exceed $300,000,000 
if consideration be given to the company homes of the oil field workers, the many pump- 
houses, factories and warehouses as well as the tall office structures on strategic sites. 
Here is shown the home of California’s foremost oil company at San Francisco, seen from 
Nob Hill in 1928. In April, 1926, the new Standard Oil Co. of Calif., now owning the 
Pacific oil properties, became a $600,000,000 corporation. In 1926 it earned over $55,000,000 
for dividends and surplus. 


Who’s Who in Oildom Ownership. There are various criteria for ranking 
the oil companies of our country as shown later in this chapter. Among 
these are capitalization, working capital income, inventories of oil, divi- 
dends and dividend rates and ratio of current assets to current liabilities. 
In regard to total resources inclusive of cash and securities, the leading 
operators occupy the order indicated below. The figures are based upon 
the companies’ own reports. They may be taken to represent the percent 


of the total which pertains to each company, or units of practically 100 
million dollars. 


304 OILDOM: ITS TREASURES AND TRAGEDIES 


Standard Oil, No Jeo... 13 Gul€sOilvCorp ye rae cle 4 Tidewater Associated... 2.2 
Standard Oil, Calif..... 5.4 The Texas: Co. ses hie oe 3.9 Pure Oil (Dawes)...... 2:1 
Standard Oil, N. Y..... Bel Sinelair’ Consol....: 3.1. Sea Pan Am. P. & Transp.. 1.9 
Standard Oilsands... 3.9 Shell Unione seeics cote ore 3.1 — 

—— Empire Gas & Fuel.... 2.8 Total, nine independents 25.6 
Total; four Standards... 27.4 Union Oil of Calif...... 2.3 


Accordingly, 18 companies possess about 53 percent of the aggregate 
assets of the oil industry. The next five belong to the Standard group: 
Humble Oil and Refining, 1.6; Prairie Oil and Gas, 1.4; Vacuum Oil, 1.4; 
Prairie Pipe Line, 1.3; Atlantic Refining, 1.3; total 7 percent, or with the 
four major Standards, 34.7 percent for the nine. The succeeding seven 
are mixed: Phillips Petroleum, 1.25; General Petroleum (a California oper- 
ator, now part of Standard of N. Y.), 1; Ohio Oil (a Standard), 1; Marland 
Oil, 1; Mid-Continent Petroleum (formerly Cosden & Co.), 0.8; Continental 
Oil (see map, page 116), 0.7; Skelly Oil, 0.6. From the foregoing it ap- 
pears that 25 Standards and Independents possess about 71 percent of the 
total assets. The following five, each with assets of $51,000,000 or more, 
bring the total (for 30 operators) up to 74 percent. California Petroleum, 
Producers & Refiners, Sun Oil, Standard of Ohio, and Transcontinental 
(Benedum & Trees interest) .* 

Brief Review of Recent Events. The year 1925, with over three-fourths 
of a billion barrels to its credit, astonished the connoisseurs who had 
looked upon 1923 as the peak year in crude oil production. The year 1926 
is more like 1924, being without violent ups and downs. Output increased 
almost steadily, and in August had reached the same weekly rate that pre- 
vailed in August of 1925, practically 15 million barrels; estimated total 
for 1926, about 775 million bbls. Its value may yet equal that of 1920 
when the domestic crude yield was hardly four-sevenths as great but worth 
$1,360,000,000 at the well—eight percent more than in 1925. Considering 
the complete industry, 1926 is surpassing 1925 and apparently equalling 
1920 in all-round prosperity. Net income for dividends and surplus of 
65 oil and pipe line companies in 1925 approximates $650,000,000; in 
1926, probably more than $700,000,000. Smackover, Ark., eclipsed all daily 
records of domestic pools with over 400,000 bbls. average during last week © 
of May, 1925. Gasoline manufactured amounted to 260 million bbls. in 
1925 (21% percent more than in 1924) and 300 million bbls. in 1926, due 
to increased recovery through cracking. Exports of all forms of mineral — 
oil exceeded $500,000,000 during the year ended June. 30, 1926. Stocks of 
all kinds were 550 million bbls.¢ on Sept. 30, 1925, unequaled before. Stocks 
of gasoline were 46 million bbls. in April, 1926, the highest ever. Domestic 
demand grows with increasing automobile consumption so that the industry 
did not fear overproduction in 1926 otherwise threatened by the deep de- 
velopment at Beaumont (Spindle Top, Texas, pages 40-41), the wide opening 
of the Panhandle (Texas) and Sunburst (Mont.) fields (pages 33 and 69), 
and new discoveries in Oklahoma and California. An epidemic of mergers, 
1925-26, promoted practical conservation and financially strengthened those 
involved through better balancing. 
~—* Adding the assets of the next ten, inclusive of South Penns Pan American Western 
(Doheny), Union Tank Car, Standard of Kentucky, Barnsdall, and others, bring the grand 
total for 40 operators up to $8,150,000,000, or say 77.5 percent of the total for the entire 


country. Ownership in oil can not be said to be as concentrated as in copper, motors, 
and iron and steel. 


+ Enough liquid to fill a lake two miles by 10 miles to an average depth of over 5 feet. 


OILDOM: ITS TREASURES AND TRAGEDIES 305 


Financial Treasures versus Tragedies. Financial tragedies caused by 
pure promotions and mushroom operations have been considered elsewhere 
(pages 72, 79, 81, 102, 105 and following chapter). Tragedies and treasures 
relating to the legitimate or established industry are more frequent in the 
finding and producing than in the refining of petroleum. The great oil 
fires of the spring of 1926 in California and the Gulf region were tragic 
enough with their total loss of over thirty lives, but financially they were 
not of much consequence to such strong concerns as the Gulf, the Standard 
of California and the Union Oil. The public has heard much about these 
and other individual tragedies, but there is one mass tragedy about which 
very little has been told. According to E. W. Marland, the total returned 
through the sales of crude oil—$7,500,000,000—was only 62% per cent of 
the sum spent up to 1924 in finding, developing and producing mineral oil, 
the branch in which 99 percent of the operators are actively engaged (see 
under “LOSSES”). 


Other Branches Not Altogether Treasure Bearing. Tragedies arose in 
transportation during 1923 when it became cheaper to move California oil 
by tanker to the Atlantic seaboard than to pipe Mid-Continent petroleum 
thereto (pages 88 and 90). These tragedies were temporary, affected pipe 
line companies perhaps more severely than producers, and were ameliorated 
by the recent mergers. On the other hand, numerous refineries shut down 
in the interior of Texas and especially in Oklahoma prove that the more 
settled manufacturing end is neither uniformly nor universally properous. 
The overbuilding of small refineries began with the Ranger boom about 1918. 
Production of the different pools declined fast and portable refineries were 
not available. Some of the plants never paid for themselves. A few 
were luckily located at convenient points with regard to pools found later.+ 


Unlike Most Manufacturing and Coal Mining. To a certain extent 
petroleum partakes of the nature of other industries; it yields profits if 
fortunately located and economically operated.{ But unlike ordinary busi- 
ness the crude oil industry can not at will multiply production to meet an 
increase in consumption either in a reasonable time or by a reasonable 
advance in price. Nothing but a long period of time and often only by 
doubling the price can production be stimulated enough to meet the demand. 
In other lines, such as coal mining and clothes making, output be reduced 
overnight to meet any decrease in demand. In the oil business production 
as a whole must go on regardless of a lessened demand or a diminished 


¥ On financial phases of refining see: ‘““The Profitable Refining of Petroleum” by H. L. 
Debar, The Oil Weekly, Jan. 21, 1922; “Preventable Losses in Oil Refining,’’ The Calorizing 
Co., Oliver Bldg., Pittsburgh; ‘‘Distribution of Refining Costs’? by R. D. Matthews, A. P. I. 
meeting, Ft. Worth, Dec., 1924; ‘“‘The Refiner’s Troubles,’ Petroleum World, December, 
1925; “Refineries Spend $100,000,000 Yearly for Supplies,’ H. J. Struth, Oil Trade, Feb., 
1926; “‘Investments and Expenditures in Refining,’’ C. O. Wilson, Oil & Gas Journal, Oct. 8, 
1925, and “Strategy of Seaboard Refineries,’ L. M. Fanning, idem., July 8, 1926. 

~ “But there is no certainty that even the company which possesses leases in established 
fields will prove profitable. Under these circumstances it is ridiculous to assume that 
mushroom promotions by men without experience in the oil industry, and whose talents 
lie rather in the direction of writing advertisements, can yield profits to those foolish 
enough to invest in them.’—‘“The Evolution of the Oil Industry,’ Doubleday, Page & Co., 
$1.50. 


306 OILDOM: ITS TREASURES AND TRAGEDIES 


UNNECESSARY NUMBER OF 
WELLS SHORTENS LIFE, 
INCREASES COST AND” 
REDUCES PROFITS. 


Offset or line drilling at 
Desdemona (in Eastland and 
Comanchie Counties) brought 
wells only 50 feet apart before 
the new Texas laws made the 
limit 300 feet. 


— Photo by the Author, 1919. 


price. In fact, according to H. L. Doherty,* offset drilling must proceed 
even if there is a glut of oil on the market; else the lease of the land may 
be forfeited. The hazards in finding oil have never been exaggerated. 
They exceed 20 percent in the United States and 60 percent in Mexico, con- 
sidering both pure wildcatting and drilling in proven fields. 


OPERATING COSTS OF THE OIL INDUSTRY 7+ 


Annual Expenditures by Divisions. Since 1911 the Standard Oil Co. of 
N. J. has invested nearly $800,000,000 in property apart from operating 
outlay. The annual capital outlay of the entire industry has increased 
from about 900 million dollars in 1922 to 1,200 millions in 1926. Adding 
the operating outlay would bring the aggregate annual expenditures of the 
industry to a total between $3,000,000,000 and $4,000,000,000. The distribu- 
tion is below. 


Divisions Million Dols. Divisions Million Dols. 
Exploring, leasing, etc........... 150—200 Gathering, storing, moving..... 300— 400 
Drilling and equipping........... 500—650 Refining (excl. cost of oil)..... 600— 750 
Lifting or puUMpINE weak 550—750 Marketing refined products..... 900—1250 


Elements of Cost Comprehensive.. Before the income tax law encouraged 
more accurate or complete accounting, many operators overlooked such ele- 
ments as depletion of oil deposits and depreciation of equipment. Salaries 
and wages usually make the most important cost item. Equipment and 
supplies are exceedingly comprehensive and include nitro-glycerine for 
shooting wells, diamonds for core drilling and sulphuric acid for refining. 
Royalties are rarely paid in cash, generally in kind, and so may not appear 
on a cost sheet. Bonuses may prove a big factor in swelling the cost per 
barrel. Transportation affects both the material cost to the driller and 
producer and the crude oil cost to the refiner. Teaming and trucking run 
into high figures on heavy roads. Fuel or power is the principal item in 


* Chairman of the Board, Cities Service Co., controlling Empire Gas & Fuel Co. To 
stabilize conditions, he claimed it would take $1,000,000,000 to store a six months’ supply 
of oil, figuring cost of oil, gathering and transportation charges, and the erection of 
tankage. This was over five years ago. His prophecy has come true. The two Americas 
then produced at the rate of 600 million bbls. per annum contrasted with nearly 940 million 
in 1926, despite the 25-million decrease in Mexico, making now 87 to 89 percent of the 
world rate. 

+ Current data on the cost of produ¢ing crude oil is hard to get. ‘“‘Operators will seldom’ 
give out their costs.’”—Thomas Cox, Transactions of Am. Inst. Min. & Met. Eners., 1923. 
‘‘We need more exact data on costs so as to measure the profit element.”—J. E. Pogue, 
idem. 


OILDOM: ITS TREASURES AND TRAGEDIES 307 


operating pipe lines. Losses must be charged off whether caused by leak- 
age, fire or theft. Interest, insurance and pension payments must not be 
ignored. Taxation takes forms only less multitudinous than in Mexico.* 


wes 


—Standard Oil Bulletin. 


ROAD BUILDING REQUIRES MUCH CAPITAL IN ROUGH COUNTRY 

Particularly in Southern California must many of the wells be drilled in hilly regions 
as in the new Ventura (Avenue) field or in the Wheeler Ridge district (see page 64). 
The combined direct and indirect taxes on gasoline, the oil industry, motor 
car manufacturers and their customers made about $1,244,000,000 or over 
one-third the cost of the Federal Government in 1926. 

Salaries and Wages Not Excessive. In 1919 the Census reported this 
item at $168,000,000 in the crude oil and gas industry and at $116,400,000 
in refining, making a total of $284,400,000 exclusive of the salaries and 
wages paid in the transportation of crude oil and in the distribution of 
refined products. Since then the production of crude has practically 
doubled, that of gasoline has quadrupled and costs have mounted con- 
siderably. The number of attendants at filling stations must have in- 
creased at least fourfold. The annual pay-rolls of Texas oil companies 
alone have been estimated at $250,000,000. Those of all oil operators in 
every branch can not total much less than $1,000,000,000 per annum. The 
rate of compensation may range from $1,200 for some employes to $125,- 
000 for the highest salaried executive. The latter is not exorbitant con- 
sidering the recipient’s long training and responsibility and comparing it 
with the one-night winnings of a popular pugilist.+ 

* To the credit of the American Petroleum Institute, it may be stated that the oil industry 
has recently adopted a uniform system of accounting. Probably no other great American 
industry has advanced so far. See report of the committee, M. W. Mattison, chairman, 
made at the A. P. I. meeting held in Los Angeles, January, 1926. Among papers read before 
the Tulsa meeting, December, 1926, were ‘Accounting in Gasoline Manufacture,’ by G. F. 
Winters, of Phillips Petroleum Co.,. and “‘Marine Accounting,’ by F. S. Reitzel, of Sun 
Oil Co. See Oil and Gas Journal, December 16, 1926. 

+ At least one company has abolished the distinction between ‘‘daily wage” and ‘annual 


salary.” See page 33, ‘Standard Oil Spirit,’’ K. R. Kingsbury, Pres., Standard Oil Co. of 
California, May 30, 1923. ‘ 


308 OILDOM: ITS TREASURES AND TRAGEDIES 


—Rig and Reel Magazine. 


EQUIPMENT MUST BE REPLACED AFTER OIL FIELD FIRES 


Equipment, Supplies and their Standardization. About $250,000,000 is 
estimated as paid out yearly to the workers who manufacture materials, 
tools and machinery used in the oil business. The drilling and equipping 
of new wells require from 400 to 500 million dollars worth of supplies and 
equipment, 60 percent being for casing and pump rods.£ Millions will be 
shortly saved through the adoption of uniform specifications and standards 
by the manufacturers. In January, 1926, a series of reports was made on 
standardization to the A. P. I. by 10 special committees, the national 
chairmen of which were J. Edgar Pew, A. H. Riney, A. B. Steen, Thomas 
Fleming, Jr., W. W. Fondren, H. J. Lockhart, J. F. Lucey, C. C. Scharpen- 
berg, W. W. McLane, and G. M. Vanderveer.—Naturally, the makers of 
tubular. goods and oil well supplies have prospered during late years, but 
when times have been bad they have been called on to extend large lines 
of credit to small producers and drilling contractors. 


—The Texaco Star. 


THE MANUFACTURING OF CONTAINERS ADDS TO MARKETING COSTS 


Shown here is the cooperage, case and can factory of a leading independent at Port 
Arthur, Tex. The employes of this plant increased from 150 in 1909 to over 1,500 in 1925. 
Inclusive of steel drums, 10-gallon tins and wooden boxes, the annual eall for all kinds of 
containers means now an expense over $125,000,000 (see page 85). 


t See Oil Trade, Aug., 1925, map by H. J. Struth showing distribution by states. 


OILDOM: ITS TREASURES AND TRAGEDIES 309 


FUEL, POWER AND ELECTRIFICATION 


Power and Fuel, Potent Cost Factors. In 1919 fuel and purchased power 
cost the crude mineral industry $123,500,000. This item was surpassed by 
“Salaries and wages” (1,456 million dollars), “Supplies and materials” 
(528), “Royalties and rents” (175), and ‘“‘Taxes” (141). It probably ranked 
fourth in 1925 in both the entire mineral industry and in its petroleum 
branch which alone is now spending from $150,000,000 to $200,000,000 
yearly for fuel and power in producing, transporting and refining crude oil. 
Natural gas is the most economical and popular fuel for drilling; yet six 
million barrels of oil were probably consumed in 1925 for field purposes. 
Very little coal is used in drilling, but in 1919 the solid fuel used in re- 
fining was equivalent to 70 percent of the oil (23.6 million bbls.) burned 
therein (see Oil Trade, October, 1926, p. 65).* The foremost refiner is 
prepared to burn either fuel according to which is the more economic. In 
1927 the refinery of Standard Oil of Louisiana will use gas from the great 
Monroe field. Refining requires more heat but less mechanical power than 
oil production. Around Bradford, Pa., the gas engine has gained favor 
since it has cut the fuel cost to as little as 1 cent per foot. There the 
preferred power for pumping, however, is compressed air. 


Electrification in Field and Refinery. Because of its lower cost and other 
advantages, electric power is coming into favor for drilling, pipe line pump- 
ing and refining. Savings by pumping electrically may vary from 3 to 8 
cents a barrel over other methods. One of the first uses of electricity 
was for rig lighting and arc-welding; the next was for pumping by the 
South Penn Oil Co. in 1905. A great obstacle to the widespread adoption 
of electric drive, particularly in rotary drilling, is the possibility of the 
failure of the supply, often with consequent disaster. Electrification has 
not advanced as rapidly here as abroad for two reasons: (1) Failure of the 
American companies to appreciate the possible economics; (2) an apparent 
disinclination of power companies to solicit oil field load, considering the 
returns not commensurate with the services demanded. American manu- 
facturing showed 60 percent electrification in 1924. The oil industry is 
only 5 percent electrified compared with 1 percent of the railway mileage 
and 7.8 pr cent of the farms, according to Samuel Insull. 


Electric Drilling Costs One-third that of Steam Drilling. Although 
speed, power and flexibility are inherent attributes of motor drive, the 
outstanding feature is operating economy. At 2 cents a kilowatt-hour for 
electricty and $1.50 a barrel for fuel oil, the unit cost of electric drilling 
is but one-third that of drilling with steam. The development of differential 
gear for automatic control ¢ in well drilling has advanced the conservation 
of capital. By this application of electric power to rotary drilling one 


* According to The Oil and Gas Journal, July 1-27, 1927, page 47, U. S. refineries in 
1925 consumed 6 million tons coal, 50 million bbls. fuel oil and sludge, and over 120 million 
M. ft.? gas. Read “Greater Fuel Economy in Refineries,’’ idem, 1-27-27, page 72. 

7 See page 107, Bulletin 224, Bureau of Mines, by H. C. George; also “The Engineering 
Achievements of the Westinghouse Electric & Mfg. Co. for 1925,’’ by H. W. Cope, assistant 
director of engineering. 

i “Electrification in the Petroleum Industry” by H. E. Dralle, general engineer West- 
inghouse Electric & Mfg. Co., A. P. I. meeting, January, 1926, quoted in Oil & Gas Journal, 


310 OILDOM: ITS TREASURES AND TRAGEDIES 


California company bored two 3,700-foot wells at an energy cost of 28.8 
cents a foot where the power rate averaged 1% cents; also four 3,600-foot 
wells at only 9% cents a foot where the rate was not quite 1 cent a killowatt- 
hour.t 


PRE-DEVELOPMENT COST 


Geological Work Inexpensive But Essential. Ignoring geological science 
at the very beginning of an oil venture accounts for countless failures in 
this business. Organized search and the scientific selection of oil bearing 
structures are usually essential to financial success (footnote, p. 40). Ad- 
mittedly, as in the Los Angeles basin, lucky strikes have been made for 
which the geologist can not claim credit. However, the two greatest light- 
oil fields in the Mid-Continent, Cushing and Powell, were discovered as 
results of deliberate search made by two distinguished geologists, R. E. 
Vandruff and F. Julius Fohs. Wideawake operators, like the Guif, Mar- 
land, Pure, Union and Vacuum companies, do not aim to spare expense by 
neglecting geological work. The cost is trivial compared with the tre- 
mendous returns. The Vandruffs received but $800,000 for their services 
although the 300 million barrels of light oil produced to date from the 
Cushing field would be worth $600,000,000 at only $2.00 a barrel.* 


Outlay for Leasing Often Large. If the geologist has reported favorably, 
the actual leasing is done by a member of the land department. The cost 
of a leasehold may be either nominal or enormous according to the bonus 
price. In some cases the land owner asks for royalty only, provided the 
development is not deferred. Usually, nowadays, he gets both bonus and 
rental. If an operator locates good oil land in the absence of competition 
‘a leasehold may cost very little. He may even procure the fee title for a 
farthing if he is foresighted like E. L. Doheny in Mexico; but this is the 
exception. During the Beaumont boom, 1901-1902, over $100,000 was re- 
ported paid for a lease on a single acre at Spindle Top where a second 
boom is now in progress. This was ridiculously high in view of the low 
price of 5 cents of which Gulf Coast crude sold at one time. Among big 
bonuses given for any sizeable tract may be mentioned the $1,990,000 paid 
by the Midland Oil Co. for the privilege of drilling 16 3,000-foot wells on 
160 acres of the Burbank field in Osage County, Oklahoma (equivalent to 
$12,444 an acre). Cosden paid but $35,000 less for the lease on a nearby 
quarter section, at the same Osage auction sale in March, 1924. 


£‘“‘Hild Electric Drive’? by Thos. Fleming, Jr., vice-president, Oil Well Supply Co., 
idem.: Gulf Production Co., at Hull, Gulf Coast field, during 1924-1925 drilled five wells 
3,000 to 4,000 feet deep at an average of 20.4 cents a foot for power compared with an 
average of 55.5 cents a foot if bored with steam drive. 

The world’s deepest hole bored with an electrically driven rotary is the No. 96 of the 
Chanslor-Canfield Midway Oil Co. in the Brea-Olinda or Fullerton field near Los Angeles. 
It was 8,046 feet deep in September, 1926, or 455 feet deeper than E. J. Miley’s No. 6 
at Athens, Calif. (7,591 feet), which holds the steam rotary record or the Peoples Gas 
Co.’s Ligonier (Pa.) well which has the: record (7,756 feet) for any hole drilled with 
standard or cable tools—Oiwl & Gas Journal, July 22 and August 12, Philadelphia News 
Bureau, September 7, Oil Trade, October, 1926, p. 46. 

* See 2-page story about the Author’s former associates in the Scientific American Sup- 
plement of June 9, 1917. See also pages 42 and 78 and chapter XII. 


OILDOM: ITS TREASURES AND TRAGEDIES S11 


Ignorance and Interloping Boost Bonus Costs. In regard to bonuses of- 
fered for Osage leases most regrettable lack of information was shown. 
While some of the bidders had availed themselves of geological guidance, 
many tracts with favorable oil structures were neglected and large bonuses 
paid for others that may never pay out; all the more unfortunate because 
Osage leases require early drilling. Promoters and irresponsible speculators 
often compete with established operators, particularly in new fields where ex- 
citement runs high. These interlopers greatly increase the amounts that 
must be paid for leases whether on proved or wildcat land. While not 
fictitious, per se, such fancy prices make it hard for the Treasury Depart- 
ment to adopt sales values in actual transactions as a method of limitation 
for depletion deductions on income tax returns. 


Capital Conservation Through Core Drilling. The average driller is 
“at sea” in trying to keep a well log comparable in accuracy with that of 
a vessel on a voyage. It is a shameful fact that the geological records of 
nearly 90 percent of the wildcat wells drilled in the United States are 
practically worthless. In the entire country 5,583 dry holes of all kinds, 
including wildcats, were put down in 1923, one of them costing $500,000 
to complete. Considering the cost of only 2,500 unreliable tests as the 
annual average at $40,000 each would mean $100,000,000 thrown away 
each year. The same number of holes bored with core drills to an average 
depth of 3,300 feet at a cost of only half that huge sum would not only 
save $50,000,000 a year but would supply absolutely dependable records of 
the geological formations (pages 47-49). 


Cost of Core Drill Exploration. Such substantial saving is made pos- 
sible largely because so little and such light casing is required in core 
drilling. The elimination of cumbersome casing and of the attendant 
labor has conserved from $90,000 to $140,000 on 5,000-foot tests bored with 
core drills in California. Coring at intervals only, as practiced in Cali- 
fornia and the Gulf Coast (pages 44-45), runs the cost per foot of core 
as high as $50. Neverthless it is worth while since it insures production 
which might otherwise be missed.* Continuous coring with black diamonds 
is rather reasonable although their price has increased three-fold in thirty 
years, being now $110 to $150 a carat. The consumption of carbons varies 
greatly, even in oil bearing strata—from 5 cents to 50 cents a foot. The 
total per foot, allowing for depreciation, runs from $1 to $7 according to 
depth, power, need for casing, nature of formations, ete. 


+ David White, introduction to Bulletin 686, U. S. Geological Survey. The Osage Reserva- 
tion is financially important because, even at this later date: (1) It contains much unleased 
oil land; (2) anticlines and domes are numerous and drilling indicates that most of them 
yield oil; (3) productivity of developed areas in high and sustained; (4) oil is of parafin 
grade, yielding 50 percent gasoline; (5) pipe lines and refineries are at hand; (6) the 
Office of Indian Affairs, which administers the land, offers leases at auctions on advertised 
dates. 

* <The first well to produce oil in the Dominguez field was the ‘Callender’ of the Union 
Oil Company of California. Had no core been taken the presence of oil might have been 
discovered only accidentally or it might have entirely escaped detection, as it actually did 
in two other wells drilled before in that locality.””—R. P. McLaughlin, Houston meeting, 
American Association of Petroleum Geologists, 1924. Late in 1925 some 60 diamond 
drills were operating in one part of Oklahoma, according to J. L. Dwyer in the Oil & Gas 
Journal, November 19. See idem., April 8, 1926, on cost of equipment and operating; also 
Oil Trade, January, 1924, p. 46. On the value of drill cores to the operator, see Press 

Bulletin 2060 of the Bureau of -Mines describing Bulletin 243 by Fy A. Edson. 


312 OILDOM: ITS TREASURES AND TRAGEDIES 


PORTABLE RIGS AND ENGINES 
PROVE ECONOMICAL FOR 
SHALLOW DRILLING 


This is a Star cable machine in- 
tended for 1,000-foot development 
in the 2-5 District, Stephens Co., 
Okla., early in 1920 by the author 
and his Los Angeles associates. 


COST OF DRILLING AND EQUIPPING WELLS * 


Equipment and Supplies Variable Factors. Portable steel derricks are 
the most economical and durable. Delivered and erected near railways 
they cost from $1,000 to $4,000, but each being serviceable for 40 or 50 
wells, the cost per well may be reduced to $100 in rare cases. A portable 
cable drilling outfit, good for 1,500 feet, may cost only $3,000; the ordinary 
cable or standard tools with boiler and engine, good for 2,000 to 4,500 feet, 
from $4,000 to $16,000; a complete rotary with drill pipe and steam power 
plant, for 4,000 to 5,000 feet, from $30,000 to $40,000. According to the 
number of strings and their weight or size, the casing cost may vary from 
$5,000 for a 2,000-foot well to $16,500 for a 3,000-foot well (in Burbank 
field); or it may be as low as $500 for 500-feet (in North Central Texas) or 
as high as $7,700 for a rotary drilled well 3,400 feet deep (in the Gulf 
Coast fields). If the drilling is not, as usual, done by contract the drilling 
tools may be rented at $10 per day for small cable outfit to $100 for com- 
plete rotary (without boiler). The cost of pumping equipment per well de- 
pends upon the depth and the power used. The principal items of equip- 
ment for drilling and operating the world’s second deepest rotary hole 
(7,591 feet deep)} were: 


Casing) 42 r w ae. $28,526 Use of rotary, 230 days... $23,000 Steel itanks@ aan. $3,866 
Steam plant ... 9,917 Production equipment .... 4,335 Pipe: lines) @aeqce. 3,155 
Wire lines ...... 5,187 Rie) andes derrick ns cee 4,153 Gas traps, ete... 1,961 


making a total of $84,100 or almost half the total cost of $170,424. 


Wages of Oil Field Workers. In 1919, when production was at half the 
present rate, the total wages paid in the crude oil industry was $134,500,000 
compared with likely no less than $300,000,000 in 1925. Wage rates have 
dropped very little since 1920 for which year the following statistics were 


* “Drilling costs are composed of elements which vary widely with the depth of the well 
and the difficulties encountered. The principal items are: (1) Drilling rig, (2) drilling con- 
tract, (3) casing, (4) fuel and water, (5) pumping equipment and (6) miscellaneous labor 
and supplies.””—“‘Business of Oil Production,” by Johnson, Huntley & Somers, John Wiley & 
Sons, 1922. This book, in Chap. XIV, details the cost of drilling in 9 fields during 1921. 

The cost factors are more completely analyzed by Thomas Cox in “Trans. of the Am. 
Inst. Min. & Met. Engrs.,’”’ vol. LXIX, page 1133. 

t See The Oil Weekly, February 12, 1926. 


OILDOM: ITS TREASURES AND TRAGEDIES 313 


published by the United States Department of Labor showing the average 
number of hours per week and the average earnings per hour. Earnings 
per day were calculated by the author, based upon a 12-hour day for drillers 
and tool dressers since the 8-hour day was not adopted in California before 
the summer of 1925. 


No. of estab- No. of Hours Earnings Earnings 
Occupations lishments employes per week per hour’ per day 
rvilearcame eves eee Wee 2. cars. cese e's 54 2,575 73.6 $1.140 $13.68 
PPOOIAOT GSSGTS cs. ci-- {cies Siok sie se Shwe 49 1,894 78.6 934 ate ayn 
TRb cect dahemd(oleral=' grote ke Skies unae oe ey eure 19 432 55.2 .919 8.27 
WheacbritstS sees tects t aihouaee keene chose os olece 25 274 55.6 -890 8.01 
Drillers hnelpers, 6tes....<+.cce. « 32 PAB YE 59.7 .683 6.15 
are OMniGnteeree eee hc ects tianete cc oles 29 1,128 Diet -651 5.86 
ROU STAD OULS ETOCS le ale tie hese etare 56 11,913 BT27 589 5.20 


Unit Cost Varies with Depth. To illustrate the increase in cost with 
depth the following table has been taken from the transactions of the 
American Institute of Mining and Metallurgical Engineers. It relates to 
cable drilling in Osage County, Okla., during 1922. 


Developed Fields Untested Territory 
Depth Per well Per foot Depth Per well Per foot 
TOO Be snes o cle he aoe $5,000 $5 PAT OR era tee ert ave an a. bapa $21,000 $12 
AG DU mere tray chet ctilaeicc aie. « 9,000 6 PEOOOMs tee eee ee le eee 26,000 13 
AUN ” Scrape rls te ae PR ee 14,000 4 2 BO OM ernie caterers. caenne 37,500 15 
STAD INES Bey 6. Sta is ae oeme aA ae 33,000 11 SEAS. 4 4h tees Ta Nice PR Seth 75,000 20 


The depth is doubtlessly the greatest factor in bringing up the average 
cost of drilling wells in the United States from $3,200 in 1912, to fully 
$25,000 in 1926. The electrically drilled world’s deepest hole cost only $25 
per foot. 

Geographic Range in Cost. It is a far cry from the drilling of a 60-foot 
hole in Pennsylvania 67 years ago to that of a 5,000-foot wildcat in the 
wilderness of tropical Colombia in the year 1924. The former may have 
cost less than $500 using a spring pole; the latter fully $500,000, using a 
standard rig. Between these two extremes may be found varied costs of 
development due to the different geological conditions or to the use of the 
right or the wrong type of tools. 

+ Thomas Cox, page 1131, vol. LXIX, February meeting, 1923. 


—Photo by the Author. 
FLOOR OF A ROTARY RIG IN TEXAS 


314 OILDOM: ITS TREASURES AND TRAGEDIES 


Depth Drilling Contract Cost of Complete 


Field feet system per foot casing cost 
Greenwood (Cons Kans rei oe ers cee auneuekiie 2,200 Cable $1.75 $9,000 $22,000 
Cowley; Cos Ria nisin bia ey Vea eh ro ee sehen 2,800 Cable 2.75 18,000 30,000. 
Burbank, Olja sire se micionieee Waa one MG CART SAL 3,000 Cable 3.50 21,500 43,200 
Tonkawa “(deep ) (Okla oy tis ee ee oie cone ans 4,200 Rotary 9.00 18,200 68,000 
Salt: Creeks, WW0 ck eee a near crane cholate eae 2,640 Cable 3.50 9,800 25,800 
Powell ck Cent. fexe yee Niece ae een are 2,950 Rotary 3.00 4,200 22,100 
Bristow, OK a ee eae eee Oe Sin ie ha Gene eee 3,000 Cable 20 12,600 25,000 
Wewoka Ok aaa ian ace aleaoseman aren nino nes 3,050 Cable 4.09 19,000 38,000 
Athens: Calid 22 sce co gee iis caetaigh eRe Ace 7,591 Rotary sts 28,500 170,400 


If the well is successful there is a salvage to be realized from $2,000 in 
Greenwood County to $13,200 in the Burbank field. In general the rotary is 
more expensive than the cable system for shallow wells and very deep ones. 


COST OF PRODUCING CRUDE OIL 


Six Sources of Production Expense. According to the Bureau of Mines * 
the operating costs in the producing branch may be grouped under six 
heads: (1) Overhead or general expense, including salaries of clerks and 
executives, legal expense, insurance, rent, taxes, etc.; (2) general develop- 
ment expense, covering land and leasing, chemical, engineering, geological 
and scouting departments; (8) development expense, embracing bonus pay- 
ments, drilling costs and outlay for new production; (4) other or miscellane- 
ous field expense as for oil field camps, road repairs, etc.; (5) lifting expense, 
including cost of labor and materials for operating flowing wells and for 
pumping, charges for repairs and depreciation of equipment, and cost of 
delivering oil from wells to field tanks; (6) treating expense, taking in the 
outlay for maintaining and operating dehydration plants for emulsified 
oils and steaming plants for chilled or viscous oils. 


Costs Vary Greatly in Getting Out Oil. Among the factors that influ- 
ence the lifting cost are such special conditions as depth and character of 
the sands, quantity and character of the oil, pressure of the gas, volume of 
the water, and the topography around the wells. On any one property the 
lifting cost may make up from 20 to 90 percent of the ultimate cost of 
production. It may be even less than 20 percent in the case of flowing wells 
as until recently in the Salt Creek field. The table herewith, reproduced 
in part from “The Oil Industry’s Answer,” shows an interesting geographic 
range in lifting cost alone for the first half of 1921, being exclusive of 
taxes, overhead, development, depletion and depreciation charges. 


No. of Location: Bbls. per Cost per Average Lifting Power 
wells Field and State well per day barrell depth method used 
P27 ST TONES bay alpen oieeoneterenenerts -05 $4.86 1,200-1,400 Power Gas engine 
Tide Beavers © Ops der more arts Bakr 3.03 1,000-1,600 Beam Gas engine 

61 Monongalia Co., W. Va.. Aes 2.20 2,163 Power Gas engine 

7:2 Kane Conable a te nehtere 2.9 1.70 2,000 Beam Gas engine 
36 sBradfords hance cee s 1.03 1.14 2,000-2,100 Beam Gas engine 
1984 Aucustas Kans ejects cr Love .95 1,700-2,400 Beam Electric motor 
59 Washington Co., Okla... ‘43 74 470-1,850 Power Gas engine \ 
268e en Dorado: akans sevens 16.6 .69 750-2,400 Beam Electric motor 
96. (Glenn: pools Okla. stles A.1 252 1,640 Power Gas engine 

65 Washington. Co., Ohio... -78 45 300-1,200 Power Gas engine 
DV MiG oamlinGac Oats ia 34.7 -44 2,500-3,900 Beam Gas engine 

6 Wichita Co., Tex........ 82.7 BA 1,666 Power Steam. engine, 
172) ‘Osave (Cove Okilainineve sire 5.7 36 1,600-2,200 Power Gas engine 4 
21; Goose: Creek; Tex v..20s- 717.8 OND 3,040 Beam Electric motor 
65. Salt ‘Creek, Wyo fos ed. 106. .04 1,700 Flowing None 


Total Cost of Producing Petroleum. A committee of the Nat’l Petroleum 


* H. C. George (head of Petroleum Engineering, Univ. of Okla.) in The Oil Weekly, 
October 27, 1923. See Bull. 158, Bur. of Mines, “‘Cost Accounting for Producers.”’ 


: . oo 


OILDOM: ITS TREASURES AND TRAGEDIES 315 


Marketers’ Association investigated the cost of crude oil produced from 
January 1, 1921, to June 30, 1923.* Its report did not show how the cost 
factors were grouped and apparently the total cost given did not cover the 
overhead, general and miscellaneous expense as well as depreciation dis- 
tributed between drilling and lifting. Including these items, the total for 
the 2% years would probably surpass the sum of almost $3,000,000,000 or 
$2.17 per barrel according to the table below. 


SUMMARY SHOWING ELEMENTS OF COST IN PRODUCING 1,360,000,000 BARRELS 


OF OIL 
Semon rillingy (4624 ——pA2——-G2054)) MeN ILITOUAS cues. cia's slats ts so ceisl aiannuels alie-sis wie sree $1,328,000,000 
CGostrob-uitine 46360 million-oblisitat 50, cents’ albble. t.G foe. cents occ cele see 680,000,009 
Bonusess( Osage: 42-millions ; others rat, $10 van ACre) Mi iccmiaiels cis ~ s.0.0'e see areas 9:5 353,000,000 
entusism Clo seiiluiionseel Oa) <- 200 1922 200 LOLS jst ocas ocisuete tele c7e.« Siler ans vine tess 615,000,090 
Totalcosteperiod trom yJans Js, 1921. totdunes 30. 192304 wesc oe 6 aloes $2,976,000,0090 


Because of the advantageous location of the new California fields and the 
very large wells found, crude oil of a quality but little inferior to that of 
the Mid-Continent was profitably produced and marketed in 1923 at a figure 
which represented hardly half the cost of producing oil in the Mid-Con- 
tinent fields.+ 


Cost Varies Inversely With Yield. The following figures illustrate the 
fact that the smaller the well, the greater the unit costs. They relate to 
the year 1921, the yield per well per day includes royalty oil, but the costs 
pertain only to the working interest of companies operating in Osage County. 


Number Output per Production costs per barrel of net production 
of wells well per day Lifting Overhead General Depreciation Total 
Od Deer eeehitc, Hout spa ole arehareterisocars 6.58 $0.45 $0.16 $0.12 $0.29 $1.02 
iMag’ we Ne nee oi ge Lee oe 4.57 51 215 19 .26 FB 
ee) ob Smeets AG case ala oh el steno Pues oboe 3.88 Jil oL7 19 .30 1.17 
LUE lie aa Comte aD oe te NA ln Ee deere 2.42 -70 .20 sili .44 1.65 
Cae: LGA Bie Creare eterna See 1.79 .90 AS -42 .58 74 a's 
DE GWEN cee lalee Slicer es 2 hg. 6 1,31 1.08 APA .57 .74 2.66 


Preventable Increase in Production Cost. The cost rises concurrently 
with the increase in the quantity of unrecoverable oil when the lifting 
energy of the natural gas in an oil well has been dissipated. Where there 
is little opposition to the escape of gas from an underground sand, the oil 
is readily left behind. Experimentation determines what rate of produc- 
tion is most efficient. In Eastland County, Tex., during five months of 1919 
a well was allowed to waste its gas into the air in the hope that the well 
would begin yielding oil. When it finally came in the flow was reported at 
only 50 bbls. daily. Had it been closed in and another well been drilled 
lower down on the structure, so as to strike oil instead of gas (page 24), a 
gusher of 500 to 5,000 bbls. might have resulted, and the natural flow would 
have persisted much longer, thus avoiding pumping expenses during the 
interim.* 


High Bonuses Hoist the Cost of Crude. Herewith is shown the bonus 

* “Producing Cost and Market Value of Oil,’’ by C. C. Osborn, Economist, Maryland Oil 
Co., in The Oil and Gas Journal, July 31, 1924. See Oil Weekly, February 19, 1926. 

+See “Vital Needs of Oil Conservation,” by E. W. Marland in Mining and Oil Bulletin, 
November, 19238, page 962. 

* See Lewis and McMurray’s “Underground Wastes in Oil and Gas Fields and Methods 
of Prevention,’’ Bureau of Mines, 1916; also G. W. Stocking’s “The Oil Industry and the 
Competitive System,’’ Houghton, Mifflin Co., Boston, 1925,- $3.50. and page 69,, ‘‘Publie 
Hearings, May 27, 1926, Federal Oil Conservation Board.” 


316 OILDOM: ITS TREASURES AND TRAGEDIES 


price per barrel of oil recovered from the Burbank field within Osage 
County up to December 1, 1924, by the 10 operators leading in production: 


No. of Bonus paid Thousand Bonus . 
Names of companies wells for leases barrels per bbl. 
Carter::Oll=CosStandand)i ci ae ee 219 $4,029,100 10,321 $0.39 
Sinclair SOw G7 GasaCon we = sacc st cera eis nee er stone 145 3,797,300 7,820 e749 
Gypsy Oil Cot sCGulbiOne Corps) ies secs ac teberet TOT 9,058,200 15,022 -63 
Phillips PetroliesSkelly Osteo seis a ie 174 10,027,100 11,877 -85 
Prairie’ Oil & Gas (Standard)........:....6.-.; 106 4,935,000 5,598 -88 
Phillips) Petroleum eC wiv eon. omer rs oealiatsr 111 4,453,000 4,517 -98 
Mid-KansasiOil (&aGas © onus were ster. 0 eiencisereresen 39 2,775,000 1,822 1-52 
Gosden) (now Mid-Continent). + reece sie es 105 4,981,000 2,672 1.87 
Skelly?) Oi Got ese A eee yet secre aaa ao nrar 22; 1,340,000 562 2.39 
Midland Oils Com: (Doherty )ie wets totes ce ha ees art 3,631,000 703 5.16 


The total for 28 producers made $52,241,000 in bonuses and $76,312,097 
in oil. If the rest of Osage County be included the bonuses paid to the middle 
of 1925 aggregated nearly $95,000,000. The average for almost 630,000 
acres leased to July 1, 1925, was $150 per acre or about 40 cents per barrel 
output. The largest paid at any one auction was $14,193,800 on March 
18-19, 1924.* 


MARGIN BETWEEN COST AND MARKET VALUE 


High Bonuses Eliminate Profit Margin. In regard to the bonuses bid at 
the Osage sales one authority claims: (1) They are too high for the price 
of oil and give the Government wards almost the entire returns; (2) if 
such bonuses and high royalties are necessary to get production, the price 
of crude must advance fully $1 a barrel in order that the producer may 
obtain a fair return on his investment; (3) under normal operations the 
price of $1.85 for Mid-Continent crude barely permits the earning of oper- 
ating and investment costs, leaving no average surplus for dividends and 
interest; (4) prices of gasoline and other products are not high enough to 
permit the independent refiner to make any returns on his costs and in- 
vestments.** ; 

Cost Determines Price—Not True oi Petroleum. Unlike ordinary com- 
modities, the price of neither crude nor refined oil bears a systematic rela- 
tion to the cost of production. In reaching the real marginal or governing 
cost of production the crude producer must consider certain elements not 
usually taken into account by the consumer. The operator must allow for 
the depletion of the natural resources, on a cost basis often made up mostly 
of the bonus outlay, say 5 tod 50 percent of the true cost. He must also 
consider dry holes and abandonments and the rentals of undeveloped acre- 
age. If the law of marginal cost is to prevail, then Pennsylvania crude 
should command no less than $5 whereas, in August, 1926, it brought but 
$3.40 a barrel (page 75 and table under “Cost of Producing Crude Oil”). 
Many small producers of this grade are losing money.yf 


* “In the producing department competition has resulted in the payment of bonuses 
for promising acreage that a few years ago would have been undreamed of 
figures.”’—Pres. W. ©. Teagle of the Standard (N. J.) in The Lamp, March, 1923. See 
Ieig and Reel, April, 1924; Sat. Eve. Post, April 12, 1924; The Oil & Gas Journal, December 
14, 1922; July 10, 1924; March 12, 1925. 

** “Relation of Bonuses and Costs to Prices of Crude and Its Products,’”’ by Thomas Cox, 
Am. Inst. Min. Enegrs., N. Y., February, 1923. ‘ 

+ Sir Robert Waley-Cohen in his ‘‘Economics of the Oil Industry,’’ an address before the 
Empire Exhibition at London, identified the marginal cost with ‘“‘the cost of production 
of that part of the annual output which is wrested with most difficulty from the lap of 
nature.” See The Oil & Gas Journal, April 5, 1923, May 22 and 29, July 3, 10 and 31, 
1924; also The Wall St. Journal, December 2, 1924. 


OILDOM: ITS TREASURES AND TRAGEDIES nL 


Worth at the Well, 1923-1924. Arranged in the order of the average unit 
value for each of the 12 leading oil states, according to the Bureau of Mines, 
these in 1923 and 1924, together with the total in 1924, were as follows: 


Average per bbl. Total, 1924 
State 1923 1924 (millions) 
PLONTISY 1 VAthin wareect a hence are eee ere A Ree ol stan edit cuss Sore $3.61 Soi 
AWASETE WOR RGR ARETE 6 clr on 5 aan dE Bey Sh 8 Gan a ia ine eae 3:27 3.52 20.8 
OCR oe eee cere ees shane Soe A Keam Re eres 2.41 ‘2.52 7.2 
1D REO SSF Sars PO BORA Sic eaten aaa ie Mee Png eas airs Panta 1.97 1.97 14.6 
Ti See eee ene Wl ot ae aha oie so eokahicusrenarioteaane te fears deer 1.76 14.2 
COM EN eVeVT EY. - ig awe & eee ENO SVR ACRE Oo Roce RISE CCN Pee eae 1.74 1.57 2725 
LEA OEY on crate Stic Atak? ois a rOrar ICI a EE Oe Ese 1.63 1.54 44.4 
ARS eh, FANT a Ge hos J ae Seat a od, Pe ee ee ae oe 1.48 52 204 
Rete CULL nme Merit ot ay terete eect ate os Gracy eke, «feidichews ato Pa obiw. 1.39 1.56 40.6 
OUTST TVA Ee eerie Te SicL a hie te oie Rieus  cleucis © oe eels plate evalepe gra 1.47 1.44 30.3 
WV VINE CURD ewe ERIe Re crn searecatettbepaloncitic «: 2 cuceh o fcce oie Rrevetanereabhe Susiie sis e 1.09 1.23 48.6 
(GCOLITODINI GS RRO ee rete here otic aa clas esd OR sted ule als eeiete 0.92 1.20 275 
ISA ERTISEE: oe ae ons DEAE keg SSI oe PRIS OG Fp ORR OTe Ser aC erica Se eae 0.69 0.94 43.1 
RIMES LR UCSM EE eae Ta Ts erclecettrela, viele spe Me ele o'r ee es © Satie Seb weiss 1.34 1.43 1.02227 


For 1925 the average had increased 17.4 percent to $1.68 a bbl. and the 
total 25.6 percent to $1,285,000,000. The only value below $1 was in 
Arkansas where the overproduction of heavy oil at Smackover caused a 
drop to an overage of 89 cents. 


Cost Versus Market Value. The Nat’l Marketers Association has worked 
out a balance sheet for the crude oil business showing a deficit almost $1,100,- 
000,000 for the 2% years ended June 30, 1923. As already indicated, to 
produce the 1,360 million barrels of oil cost $3,000,000,000, or $2.17 a barrel, 
which seems conservative. With the weighted average market value only 
$1.39, the loss amounted to $0.78 a barrel. The total value of $1,892,900,000 
for this period was obtained by deducting only $270,400,000 for an average 
1% royalty oil from the sum of the following values, expressed in millions: 
1921, $811.3; 1922, $884.3; first half of 1923, $467.7. The average of $1.39 
corresponds closely to that of $1.34 for the full year 1923, as shown in the 
preceding table.* 


Good Prices Encourage Conservation. Living prices for the crude pro- 
ducer not only affects the prosperity of his business but also has a powerful 
bearing upon oil reserves. Mineral resources, notably copper and iron, vary 
in commercial volume directly with the price and inversely with the cost of 
mining and reduction. Pogue shows that the reserves of petroleum under 
a $2 price is relatively small but under increasing price increment would 
become very large. It is the law of supply and demand—a fundamental 
aspect thereof as applied to natural resources. Under current price level 
it is practicable to extract only 15 to 25 percent of the oil content of sands. 
When justified by higher prices, much of the remaining oil may be re- 
claimed by the more costly but efficient methods of flooding, mining, pres- 
sure, soda-solution, and vacuum.f 


Oversupply With Prices Subnormal. As narrated on pages 72-74, tragic 
consequences have resulted to operators who confine their activities to crude 
production. To them, tragedies and not treasures will rule as the return 
until the national output of petroleum falls off from 15 to 20 percent. Such 
a reduction would be found quite feasible by withdrawing oil from direct 
competition with commonplace coal, extending the cracking process for in- 


* See article by C. C. Osborn, Marland Oil Co., Oil & Gas Journal, July 31, 1924, page 152. 
+ “Production of Petroleum in 1924,’ Am. Inst. of Min. Eners., page 51. 


318 OILDOM: ITS TREASURES AND TRAGEDIES 


creased gasoline recovery and multiplying the mileage from a gallon of 
motor fuel. This would bring a price improvement without a concurrent 
swelling of total cost to the consumer. It would create a margin of profit 
for many small operators who can not continue to produce at a loss much 
needed light oil from 250,000 wells. Normal prices should be about $1 
above the recent quotations of August-September, 1926. 


VALUATION OF OIL PROPERTIES * 


Definition of Values. Ordinarily an oil property has two values: (1) 
Value in exchange and (2) value in use. The former means the sales value 
which may vary from time to time, particularly during and after boom days 
and other competitive periods. The value in use is synonymous with, its 
productive value or the present value of its future net income. It is the 
capital which the future income can repay after allowing for interest and 
risk. Since the soil and the improvements generally go with the land, proper 
accounting recognizes three elements pertaining to the feehold value of 
oil land, namely the petroleum reserves, the physical equipment, and the 
advantages of the land for building or farming. 


Variations in Value. The term “oil property” may mean the mere right 
to drill on undeveloped wildcat acreage or the actual ownership in fee of a 
fully drilled tract of oil land. It may refer to the royalty interest in whole 
or in part, or to the working interest. The value of the working interest, 
which is the “property” usually bargained for, may vary widely according to 
the use for which it is intended. The fraudulent stock promoter wants to 
inflate the value for promotion purposes; the lease speculator wants to sell 
the “property” at a good price even if it cost him next to nothing; the oil 
producer has to run risks in developing, and if oil is found has to pay for 
the cost of production, so is opposed to a big bonus or an outrageous royalty; 
the refiner or the pipe line owner may want the oil reserves so as to keep 
his plant or his pipe lines supplied when other sources become exhausted. 


Development, Equipment, Appreciation. For income purposes oil land 
has no value unless developed and equipped. The cost of drilling should 
be charged off as expense in the course of development or as capital to be 
returned before the oil reserves are depleted. The cost of physical prop- 
erty, such as casing, engines and boilers, should be charged to capital. As 
the equipment wears out, depreciation should be deducted annually accord- 
ing to its estimated life if shorter than the life of the oil reserves.+ Such 
property may have salvage value after all the recoverable oil has been 


* Abstracted in part from Robt. W. Brown’s ‘Valuation of Oil & Gas. Lands,’ McGraw- 
Hill Co., 370 Seventh Ave., N. Y., 1924. His valuation purposes are: Guidance in Opera- 
tion, Basis for Merger, Basis for Capitalization, Basis for Loan, Taxation, and Basis for 
Sale or Purchase. Principles expressed by the Appraisal Committee of the Indep. Oil 
Producers Agency consisting of Messrs. Requa, Quigg and Haseltine, were: (1) Each prop- 
erty wil ultimately yield a certain quantitv of oil; (2) in the production thereof certain 
sums will be spent; (3) a certain amount of money will be received for the oil: (4) net 
receipts will be the gross less the cost of development and production; (5) the present 
value must be an amount which invested will return the buyer the original purchase price 
plus 8 percent during the producing life. See ‘Valuation of Oil Properties for All Pur- 
poses,” by J. L. Darnell, Fort Worth meeting, A. P. I., 1924. 

+ See revised ‘“‘Manual for the Oil & Gas Industry,” by Fay, Reinholt, ete., U. S. Treasury 
Dept., 1921, pages 59-71 and pages 14-16; also “Depreciation,” by A. R. Paton, Petroleum 
World, July, 1925. 


OILDOM: ITS TREASURES AND TRAGEDIES 319 


removed. The cost of unsuccessful tests should be charged off as a loss. 
If a discovery of valuable reserves results from drilling, the land will usually 
be worth more than the purchase price (or the bonus, if the land is merely 
leased). This additional value or “appreciation” may be found by appraisal 
and should be entered in a separate account. In determining the value to 
the producer, the appraiser, unlike a bookkeeper, balances expenditures 
against receipts on business of the future. 


Methods of Valuation. Various methods have been developed, some for 
accuracy. The need for accuracy is greater for commercial than for tax- 
ation purposes. There are 5 general methods: (1) The “analytical ap- 
praisal” or present value method; (2) arbitrary methods in which “rule-of- 
thumb” formulae are applied; (3) the sales method in which sales and 
transfers are analyzed and compared with respect to the property involved; 
(4) the accounting method, in which values are determined from an analysis 
of balance sheets and profit and loss statements; (5) the comparative 
method, in which comparison is made between different properties or types 
of properties, as in the determination of value of a royalty interest from 
a predetermined value of the working interest. 


Present Value Method. This engineering method is confined to the deter- 
mination of the productive value or the present worth of the future expected 
net income. Two steps are involved: (1) Correct estimation of the elements 
of value—oil reserves, rate of extraction, price of oil, cost of producing, 
and proper discount factor; (2) mathematical calculations which, in regard 
to oil valuations, involve a separate discounting to obtain the present 
value of each year’s output since the rate of production can not be kept 
uniform as in the case of coal mining, but diminishes annually from a 
property fully developed. If a property is but partly developed that part 
should be subdivided into “flush” and “settled”? productions provided the old 
and new wells are not intermingled.t{ 


Specific values vary greatly according to the quality of the oil, the cost 
of producing, distance from market and expected life. Natural conditions 
differ even in the same field, so that it is inadvisable to buy production of 
one property based entirely upon the price paid for that of a neighboring 
one. Although the barrel-day method has been condemned,* there are 
tabulated below data on a number of actual sales reduced to the barrel-day 
basis for purpose of comparison. 


Month Daily a Lotal Price 
Field and State and year yield cost per bbl. Name of buyer 
Mos ted wists CAIs. acre chal ct one Sept., 1925 6,000 $750,000 $125 United Oil 
Wewola  Oklar SA oi siele mer kus Sept., 1923 7,900 3,000,000 379 Dixie Oil 
Mid-Continent, Okla., etc... Jan., 1917 25,000 14,000,000 560 Magnolia 
Burbank. eters Okla? sales. Sept., 1923 10,000 7,000,000 700 Mid-Kans. O. & G. 
Wilbarmver WOl, Lex sce s ae. Apr., 1926 4,800 4,000.000 750 Phillips Petrol. 
Archer County, Tex:....... Jan., 1926 600 540,000 900 The Texas 
Hughes County, Okla....... Nov., 1925 425 500,000 1,075 Indep. O. & G. 
Davenport Oklavoa7 shes. : Janz, ) 1926 750 1,000,000 1,333 The Texas 
Davenvorty Oklay .. o<.c octias Nov., 1924 210 375,000 1,784 Magnolia 


x Earl Oliver, Tulsa; formerly with Marland, Ponea City. See Oil & Gas Journal, Feb- 
ruary 19, 1925 (C. S. Larkey & R. T. Bright) ; September 17, 1925 (W. A. W. Krebs). See 


also page 71 of this book. ‘‘Appraisal of Oil and Gas Properties,’ in 24 chapters, by 
Johnson & Ruedeman, is for sale by Nat'l Petroleum News, 812 Huron Road, Cleveland: 
price, $4. 


* See papers and discussions, A. I. M. E. meeting, January, 1922; also, the author’s 
forthcoming book on “Oil Finance.” 


£20 OILDOM: ITS TREASURES AND TRAGEDIES 


On the acreage basis, producing oil land has rarely sold for much less 
than $250 an acre. In September, 1925, General Petroleum acquired 40 
acres in the Maricopa (Calif.) field at $15,000 an acre.: Proven land at 
times is worth almost as much as a.producing property if the drilling is 
not expensive. In May, 1926, Amerada Petroleum bought 960 acres in 
Hutchinson County, Texas Panhandle, for $580,000 cash. Inc‘uded were 
350 bbls. daily production from 2 wells and 30,000 bbis. stored oil. 


Assessed Values of Land, Wells, Interests and Equipment. These vary 
with the factors already stated. Fairly typical are the following assessed 
values in Texas. The famous Abrams lease on 1,550 acres in the West 


—Texaco Star. 


PART OF WEST COLUMBIA—WONDER POOL IN WEALTH PRODUCTION 


Discovered the same year 1918) as Hull, this Gulf coast pool has produced during the 
seven years, 1919-1925, almost as much oil as Hull and Humble together, with a value of 
$91,000,000. From a financial standpoint, neither Humble nor Spindle Top, each with a 
higher total output and a higher year’s peak, have proven so successful as West Columbia. 


’ The Texas Co.’s No. 1 Abrams has broken all records in yielding revenue. It came in 
here July 20, 1920, when Gulf crude was quoted at $3 a barrel. It averaged 26,650 bbls. 
the first month, making an income of almost $2,500,000, or at the annual rate of nearly 
$30.000,000, which, however, was not kept up. When earlier big wells in the Gulf coast 
fields came in the price was low, ranging from 3 cents in the early Spindle Top days (at 
Beaumont) to 45 cents during the flush days of the deep sand in the Humble pool (1915-16). 
Among the three royalty owners of the 1,550-acre Abrams lease are J. C. McKalip, formerly 
of Clarion Co., Pa., and Geo. Hamman, a Houston banker. 


Columbia field (page 71) cost The Texas Company a small sum a few years 
ago, but in 1921 it was assessed at $3,226 an acre. In Navarro County 
the assessed values per barrel of average daily output during the first 
quarter of 1926 were as follows for the working interest: $300 in the Powell 
pool and $250 in the Currie and Richland pools. For the royalty interests 
they were respectively $500 and $410. Deep wells were appraised at $2,000; 
shallow wells, $1,000 each; storage oil, $1 a bbl.; standard rigs, $1,750 each, 
and rotary rigs, $5,000; oil field boilers, $300 each; oil and gas engines, $50 
a horsepower; pumps, $25 a horsepower; tanks, from $100 for 250 bbls. 
to $1,250 for 10,000 bbls., with 10 cents a bbl. for those above 10,000 bbls.? 


+ The Oil Weekly, October 7, 1922, and The Oil & Gas Journal, April 15, 1926. 


OILDOM: ITS TREASURES AND TRAGEDIES 321 


DEPLETION AND DEPRECIATION 


Value of Assets Vary With Three Factors. A company’s resources change 
in value according to depletion, depreciation and fluctuation. Depletion is 
the decline due to the removal of oil from a natural deposit. Depreciation 
is the decline due to the effect of use, exposure, obsolescence, inadequacy 
and accident upon the physical assets such as tanks, tools and pipe lines. 
These two factors are more or less under the control of the operator. Fluc- 
tuation, on the other hand, arises from causes usually outside of his con- 
trol, for it is a manifestation of market conditions. Charges consequent 
upon depletion and depreciation may be considered as supplementary ele- 
ments of cost, although true forms of capital return. Fluctuation relates 
to the price of the product as sold and as inventoried if kept in stock, but 
primarily is one of the two factors affecting gross receipts.* 

Important for Income Tax Purposes. For a long time many operators, 
notably the large companies which had installed scientific accounting sys- 
tems, had actually recognized the fact that physical assets are subject to 
depreciation. But mighty few, if any, of all the oil companies realized the 
importance of depletion before the war awakened them through the require- 
ments of the income tax laws. Under these laws still in force, both deple- 
tion and depreciation are deductible from gross income in order to ascer- 
tain the net amount subject to assessment. To many petroleum producers 
it has proven a blessing in disguise, not the least because it has lightened 
their tax burden and supplied them with the financial sinews for seeking 
fresh deposits of mineral oil (under the incentive of the discovery clause). 

Depletion Allowance Limited, Acts of 1913 and 1916. Under the Revenue 
Act of 1913 a reasonable deduction for the depletion of natural deposits 
was permitted not to exceed 5 percent of the gross mine value of the year’s 
output. This allowance was not commensurate with the value of the oii 
or other mineral which had been extracted. In the 1916 law the statutory 
relief to the oil industry was continued, but the restrictive formula was less 
vigorous. A reasonable allowance for the actual reduction in flow and pro- 
duction, ascertained by regular flow and settled production was permitted. 
For a long time this deduction was not allowed to lessees but only to the 
lessors or land owners. Eventually the rule was changed and lessees were 
given the deduction to which they were entitled.+ 


* Partly abstracted from ‘“‘The Business of Oil Production,’ J. Wiley & Sons, 1922. 
Investors should beware of flowery statements concerning large profits in which these 
inevitable cost factors are ignored. An accounting system not allowing for these two can 
not give a correct profit and loss statement. “In its inflated profits are embodied losses of 
plant and oil values which have not been deducted as they should have been. The courts 
uvhold the truth of contention that depreciation and depletion are elements of cost.’’ See 
decision of the Knoxville case, 212 U. S. I. 

“Dividends from Deficits.’”” According to Barron’s Boston News Bureau, August 20, 1926, 
depreciation and depletion charges makes losses apparent where profits are real. ‘‘Notwith- 
standing it is a product of the war-period a corporate accounting practice of mining and 
oil companies is still confusing. When the Government began to tax American companies 
on their profits it was found that coal, oil and other mining companies were returning to 
themselves in the form of dividends what really amounted to a return of capital. They 
were therefore allowed to deduct a certain percentage of their earnings, based on given 
valuations of their deposits. Such deductions represent depletion of capital assets, and 
are not taxable as income.” 

{+ From “Income Tax Problems in the Oil Industry,” by J. J. Cosgrove, formerly with the 
Bureau of Internal Revenue; now with the Texas Company; paper read before the Fort 
Worth meeting of the Am. Petroleum Inst., December, 1924. 


322 OILDOM: ITS TREASURES AND TRAGEDIES © 


Discovery Clause Lightened the Tax Burden. In the Revenue Act of 1918 
the statutory relief to the oil industry was greatly enlarged. The restric- 
tive formula (of 5 percent gross value) disappeared, and the amount to 
be recovered through these allowances was broadened to admit new dis- 
coveries of oil deposits. Legislative recognition was given to the large 
sum of money which had been expended in drilling and otherwise develop- 
ing properties from which no returns were ever received: Under the act 
of 1921 discovery was limited in its application by the provisions which 
restricted the deduction based upon such value to the net income from the 
property upon which the discovery was established.+ : 


Newest Laws Limit Deductions to Fractions of Income. In the law of 
1924 deductions for depletion were limited to 50 percent of the net income 
from the discovery area with the qualification that, where 50 percent of 
the net income was less than the depletion deduction based upon cost or 
upon the value of the property as of March 1, 1918, whichever is higher, 
the larger deduction was allowed. . The change was made in a simple but 
effective manner. The depletion paragraph of the 1926 law, according to 
final compromise in Congress, provides that only 27.5 percent of the gross 
income from the property may be deducted during the taxable year, and 
that this sum shall not exceed 50 percent of the net income to the taxpayer 
(computed without allowance for depletion) from the property, except that 
in no case shall the depletion allowance be less than if computed without 
reference to this chapter. (For arguments against abandoning discovery 
depletion see The Mining Congress Journal, December, 1925.) 


CURRENT SUPPLY AND DEMAND 


Current Supply Has Three Sources: (1) Production, averaging about 745 
million barrels, 1923-1926; (2) stocks of crude and refined, over 538 million 
barrels on December 31, 1925; and (3) imports, 78.3 million bbls. (79 per- 
cent crude) in 1925. Production has several financial-ecomonic problems 
(chapters V, VI and XIII). While numerically not quite so important in 
any one year, stocks wield a profound influence on the prosperity of the 
oil business. The relationship of these three components of supply to each 
other and to total (current) supply and demand is brought out in the fol- 
lowing table (for future supply see Chap. XI). 


QUANTITATIVE BALANCE SHEET FOR THE CRUDE OIL BUSINESS, 1925 


(Millions of barrels) Crude run: to, stills. a2 ....cc eee 740.0 

stocks; scrude Jann. lettin ahaa sane 409.0 Crude directly consumed, etc....... 63.5 
Stocks refined, and semi-refined..... 104.0 Crude-exports oe ee eee 13.4 
Total stocks, United States..... 513.0 Votalvcrude demandes] aaa 820.9 
Production: crudesO2h ce sane 764.9 Stocks, crude, Dec. 31. ss. 4a eee 418.4 
Imports; (79 percent. crudes. 22 22.04) hous Stocks refined; ete. ons ee 120.0 
Old-andinewi supply awe. e ere eae SS DLS Demand ;plusstocks :i./.82e ee 1,355.3 


At 3.5 bbls. to the ton of coal, the stocks of all mineral oil on December 381, 1925, were 
equivalent to 2.7 times the stocks of 58 million tons of bituminous coal on hand November 
1, 1925. These oil stocks equaled half the world’s production in 1925. See art. by Chas. 
EK. Bowles in The Oil & Gas Journal, January 1, 1926. 


+ An amplification of the Law of 1918 and the regulations relating thereto appear as 
Part 1 of the revised “Manual for the Oil and Gas Industry,’’ Bur. of Internal Rev., 1921. 
Regulations 65 was modified to give effect to the changes in the Law of 1921. 


OILDOM: ITS TREASURES AND TRAGEDIES 323 


Mich pa _ 
—— \ 


Soa Oonreo 


Twines | \nd \ 


Ky Eda tered 
tek Ae 
/ 


== 


Mu ease: ene oe emt 


ve eh a 
pte 


——*2_o 
2 


eae OVER 7900 


500 TO 700 


Ate BELOW S500 


RECENT DEMAND FOR MOTOR FUEL PER CAR IN THE UNITED STATES 


Climatic and economic conditions favor the high rate of consumption in California and 
Florida (page 111, Part One), which is several times the rate in England, France and 
Germany where a much greater mileage per gallon is obtained (page 125); Total U. S. 
domestic demand in 1926 about 256 million barrels of 42 gallons or 500 gallons per motor 
vehicle exclusive of motorcycles; total exports of gasoline in 1926, about 42 million barrels ; 
total producticn, 300 million barrels including 12 million barrels of other motor fuel 


Of all forms of petroleum the per capita consumption of the United States in 1926 ex- 
ceeded 6 barrels or 250 gallons, compared with less than 5 barrels in 1921. Refinery con- 
sumption of domestic and foreign crude oil was at the yearly rate of over 800 million 
barrels late in 1926. 


—Oil Trade. 


Financial Problem of Storage. According to President W. C. Teagle of 
the N. J. Standard, these are threefold, at least: (1) Finding the capital 
for increasing storage facilities; (2) an annual budget exceeding $1,250,- 
000,000 to hold one year’s supply of crude alone in storage, and (3) carry- 
ing charges of over $170,000,000 to cover interest, depreciation, evaporation 
and taxes. Sometimes tankage for flush production is filled but once, and 
then the unredeemed cost must be written off. Allowances must likewise 
be made for inventory losses on stored oil incurred through price depres- 
sions. During the fall of 1923, more than at any other time in the history 
of petroleum, operators were obliged either to borrow money or to sell 
securities for the purpose of carrying crude inventories of their own or of 
purchasing cheap oil in expectation of price improvements. 


Unfavorable Conditions for Storing. As stated on page 81, profits on 
light oil may be lost through long storage. Gulf crude “A,” because of its 
high percentage of lubricant element, is often improved in storage. For 
financial as well as economic reasons, open earthen reservoirs are considered 
very wasteful except for very heavy oils (page 80). Texas authorities 
have outlawed such storage in the Panhandle field, summer of 1926. Every 
day a barrel of oil stays in storage adds to its ultimate cost. The annual 
charge for keeping it in steel tanks varies from 10 cents to 65 cents accord- 


324 OILDOM: ITS TREASURES AND TRAGEDIES 


ing to the time of storage and the original cost of construction. It is highest 
in flush fields where tanks may be filled only a few times or used but a year © 
er two. It is the height of financial folly to store oil above ground for 
future sale on a falling market; it had better be left below. 


Making Money Out of Crude Stocks. In periods of overproduction the 
renting of storage facilities proves almost as good a source of income as 
pipe line and tank car transportation. The principal profits, however, arise 
from the sale of oil bought during periods of oversupply from the many 
mushroom producers who have no other outlet. Established operators 
profited in 1925 from disposal of distress petroleum acquired at low cost 
in 1923. The rising market added considerably to the current assets of 
those who had carried crude inventories on their books at bottom figures. 
Prairie Oil and Gas had about 40 million bbls. stored on December 31, 1924, 
valued at $66,000,000. Since the rise of 50 cents to $1 occurred, the appre- 
ciated value about the middle of 1925 must have been between $86,000,000 
and $106,000,000. This was not so bad, remembering that Prarie’s capital 
is only $60,000,000. Standard of Indiana had upwards of 36 million bbls. 
crude in storage, January, 1925. An average rise of 70 cents meant a total 
increment of over $25,000,000. A gain of 1 cent a gal. on its 200 million 
gals. of gasoline meant an aggregate advance of $2,000,000.* 


Financial Stabilizing a Function of Storage. While not refusing profits 
to offset the risk of erecting surplus storage, leading operators really look 
upon the collective inventories of the industry as a strong stabilizing factor. 
Such stocks must be drawn upon during periods like the early summer of 
1926 when consumption exceeds current production plus imports. Empty 
storage must be used again whenever flush production, as in the early fall 
of 1926, may need relief. The natural effect of such practice will be to 
narrow the swing of the price pendulum between times of oversupply and 
underproduction to the direct advantage of the public as well as all branches 
of the petroleum industry.+ . 


FINANCIAL LOSSES AND CONSERVATION 


Indirect Financial Losses. F. Julius Fohs recognizes three kinds of 
natural resource waste which are indirect waste of capital: (1) Failure to 
recover more of the underground oil, due to natural and economic causes; 
(2) willful waste; (3) rapid exhaustion of bonanza reserves. Willful waste 
by legitimate operators is negligible. The advisability of saving bonanza 
reserves for future generations is debatable. Simultaneously with the 
exploitation of our bonanza reserves will come increasing importation of 
foreign oil. The next step will be the mining of oil sands (page 42). Sub- 
stitutes for crude oil may not be in marked demand for 50 years yet; then 
the first to be used will be shale oil. Waste in the oil industry is no longer 
like that of a decade ago. . 

Purely Financial Wastes. Mr. Fohs has gathered these into 11 groups: 
(A) Undue money cost, as in paying high commissions for raising capital; 
(B) unfair promotion practices bordering on fraud (see next chapter) ; 
(C) excessive bonuses for leases (already discussed); (D) excess storage, 
say above 125 days’ supply; (E) undersized operating units with heavy 


* Wall St. Journal, June 12, 1925, and Boston News Bureau, January 29, 1925. 
~ See The Lamp, Northrup Cleary, editor, April, 1924. 


OILDOM: ITS TREASURES AND TRAGEDIES 325 


overhead; (F) oversized units with weakened management; (G) superfluous 
protective acreage requiring rental outlay; (H) overbuilt condition; (1) 
graft, pure and simple; (J) undue middlemen’s profit; (K) incompetency 
(Chapter XII); (L) haphazard, sentimental and gambling viewpont in 
place of reasoned plan. 


Analysis of Five Loss Sources. Regarding overbwilt condition this au- 
thority gives these causes: (1) Excessive drilling of wells (pages 67, 73, 
79 and below); (2) excessive storage and field tanks (pages 74 and 81; 
(3) a plethora of small refineries (83), and (4) surplus buying of supplies. 
Graft may relate to (1) promotions, (2) purchase of supplies, (3) letting 
of contracts and (4) buying of land and leases. Inflated middlemen’s profits 
may arise from (1) sale of crude oil or (2) from sale of products. Incom- 
petency may be traced to (1) lack of good executives, (2) deficient depart- 
mental coordination and (3) nepotism. The happy-go-lucky buying and 
developing of tiny tracts is detrimental in four ways: (1) Attracting to 
unprofitable affairs capital needed for more legitimate purposes, (2) placing 
unit values on town lots, etc., disproportionate to possible returns, thereby 
fixing uneconomic values for larger areas; (3) lacking operative control of 
production and of water troubles so as to interfere even with legitimate 
offset drilling; and (4) forcing the drilling of a greater number of wells 
than is warranted to produce the oil. 


Tremendous Losses in Drilling and Producing. Dry holes drilled the past 
15 years have cost the industry about $1,000,000,000. Adding thereto the 
sum of fully $600,000,000 for deficits due to operating unprofitable wells 
brings the total to $1,600,000,000 or an average of over $100,000,000 a year 
Inst in the crude oil business alone (economic losses are listed on page 100). 
In the year 1923 this loss exceeded $142,000,000 and in 1924, nearly $115,- 
640,000 (by 2,418 corporation) according to “Statistics of Income” issued 
by the United States Bureau of Internal Revenue.* 


Relation of Losses to Prices and Conservation. Broadly viewed, the 
losses of an industry must ultimately be paid by the consumer. To per- 
petuate itself, as stated at the beginning of this chapter, any industry must 
be profitable in the main and overall profits can not be determined without 
taking losses into account. Capital losses in the oil producing industry are 
therefore conducive, in the last analysis, to higher prices. Inefficiency in 
this respect also results in higher production costs, and these compel a lower 
recovery of oil. Efficiency in the conduct of oil producing enterprises means 
lower production costs which permit operating wells for lower daily yields, 
resulting in greater ultimate recovery of oil from productive sands. From 
the conservation standpoint, therefore, the efficiency of the oil producer is 
a matter of much concern.} 


Comparative Losses of Mineral Industries. According to the same au- 
thority, as revealed in the table below, the aggregate net deficit of the 


* Edw. White Statistician, 1925 and 1926. In petroleum refining 213 companies netted 
about $146,140,000 and 329 had a deficit of $33,422,000. Deducting the difference from the 
$142,245,000 lost in crude oil production leaves a net deficit of over $29,000,000 for these two 
divisions of the petroleum industry. 

+ Lester G. Uren, of the University of California, before the early 1926 hearing of the 
Oil Conservation Board, attended by the author. 


326 OILDOM: ITS TREASURES AND TRAGEDIES 


crude oil business during 1923 was 32 times that of the much more lamented | 
gold mining industry (see footnote on preceding page). 


Branches of the Deficits Net Income Combined D & NI 
mineral industry No. Millions No. Millions No. Millions Dor NI 
Crude olin eaaeaeie wits 2,670 $179.7 1,072 $37.4 8,742 $142.3 sxiD 
Coal ee CO Aeon ee 2,481 55.9 1391 133.3 3,872 1.4 NI 
COpperiig usr oe Le aoe ee 128 11.0 24 22.8 152 11.8 NI 
Dead: andi zine se 2 oom 80 PAY Gh ai 57 10.7 137. 8.0 NI 
THON: OLFEise oe ae eee ote 53 Bag 44 8.2 97 2.5 NI 
Gold ete eet aie iar 382 9.9 82 bud 464 4.4 D 


Corporations only are considered in the above statistics. The deficit ot 
the crude oil business would be even larger if the losses of individual oper- 
ators were included in the total. 


Most Serious Source of Capital Waste is attributed to overdrilling and 
improper spacing and arrangement of wells. This practice varies widely 
and in most cases locations are fixed by property lines and competitive con- 
ditions rather than by the principles of drainage and economics (page 68). 
In the Santa Fe Springs field (see index) of 1,400 acres, 45 different com- 
panies operate. They have drilled 340 more wells than the field should 
properly support at an average cost of $100,000, a total of $34,000,000.* 
In their race for early yield they increased the monthly output tenfold to 
10,000,000 bbls. in 12 months; result: 96,000,000 bbls. of oil sold at $1.36 
less than the prevailing price before and after the peak of production—an 
additional loss of $1380,000,000. 


Loss of $218,000,000 in One Field. It is cheaper to produce oil on large 
tracts under unified control than on small tracts under separate manage- 
ment.* It is estimated that the average cost of oil production by the many 
companies at Santa Fe Springs has been about 40 cents higher than if 
the entire field had been worked under single control. This makes a further 
loss of over $54,000,000 on the 136,550,000 bbls. produced to the end of 
1925. The total of these various losses—from overdrilling, lowered prices 
and increased costs—amounts to $218,000,000 or 10 times the original cost 
of the 220-mile Los Angeles aqueduct. 


Enormous Evaporation Losses. Based on Bureau of Mines data, the 
evaporation bill in 1923 approximated $200,000,000, assuming that 45,000,000 
bbls. of the cream of the gasoline content of the crude escaped into the 
air. A detailed analysis of the cost of preventing evaporation and the cost 
of cracking heavy oil into gasoline shows that the net income from a dollar 
spent on the former is twice the net from a dollar spent on cracking. The 
estimated loss of about 1,900,000,000 gallons in 1923 was 3 times the output 
of natural gasoline. This condition, so destructive of natural wealth, is 
hard to realize.f 


*H. L.. Doherty, also before the Federal Oil Board, February, 1926, ealled attention to the 
fact that “in foreign concessions held in huge blocks, upwards of 100,000,000 bbls. have 
been produced by a single well” (Mexico, Chapter X); also that “our laws not only pro- 
duce a shocking waste, but they violate the principles of our form of popular government. 
If 100 people own property on an oil structure and 99 want to defer production, a single 
owner can either rob them of their oil or force them to drill at his will. He can carry out 
his operations so as to sacrifice the greatest part of the value of the deposit.’’ See pages 
100-102 and Chap. XI; also The Oil and Gas Jounal, October 14, 1926, “Unit Operation in 
New Pools Beneficial,’ by I. L. Dunn and J. O. Lewis, and November 11, 1926, “Ventura 
Field Controlled Reservoir,’ by J. E. Eaton. 

7+ J. H. Wiggins, in Mining and Metallurgy, July, 1924, mentions the constant filling and 
emptying of tanks as the most important cause of evaporation loss since the oil is handled 


327 . 


OILDOM: ITS TREASURES AND TRAGEDIES 
Losses from these spectacular 


Financial Losses from Fire and Explosion. 
causes average likely less than 5 percent of the financial loss from evapora- 


—Foamite-Childs Corporation. 


A TYPICAL OIL FIELD FIRE DUE TO LIGHTNING 


Unlike burning oil wells the supply can not be shut off and dynamiting does no good; 
but a film of Foamite can extinguish the flames by cutting off the oxygen. 


—Foamite-Childs Corporation. 


LIGHTNING IS THE LEADING CAUSE OF TANK FARM FIRES 
The loss while in storage is the 


at least 7 times before it gets through the refinery. 
smallest. See his ‘‘Methods of Decreasing Evaporation Losses,’ Tech. Paper 319, Bureau 
of Mines, 15 cents from the Supt. of Documents, Washington, D. C. See also The Oil & 


Gas Journal, November 5, 1925. 


328 OILDOM: ITS TREASURES AND TRAGEDIES 


tion, which is a continuous performance. In oil refining there has been an 
average of but one fire per plant in 20 years; in pipe line and ocean ter- 
minals one in 85 years, and in tank farms one in 81 years before 1926. 
Crude oil conflagrations are more dangerous than gasoline fires because 
the former frequently result in boilovers which spread the fire in the 
absence of proper protection. In volume and value of the liquid burned, 
lightning seems to lead all.causes, but the cigarette and the match are 
probably to blame for the biggest number of explosions and conflagrations, 
notably around garages and new oil or gas wells.* Among famous fires 


» 


. —Rig and Reel Magazine. 
WHAT A CIGARETTE DID AS AN AGENT OF DESTRUCTION 


Insurance companies complain that one-third of their losses are traceable to the tobacco 
tyrant. Unquestionably, the meanest. menace alike to oil stocks, oil wells, gas wells and 
gaseous coal mines is the match-lighting cigarette fiend. The spread of the nicotine habit 
among. women and children enhances ‘all the more the hazards to life and limb, health 
and wealth. In Arkansas two or three years ago, nine innocent lives were snuffed out 
by a ‘sneaky cigarette carelessly cast away at a gas well. 


may be mentioned the Black Tom disaster a few years ago when $20,000,000 
worth of gasoline was lost, and the huge holocaust at Casper, Wyo., where 
6 tanks of oil went up in smoke during the summer of 1921. In April, 1926, 
the Union Oil Co. of Calif. suffered two serious fires from lightning, almost 
simultaneously, one at San Luis Obispo} and the other at La Brea near 
Fullerton. The losses aggregated over $12,000,000, largely covered by 
insurance. Standard of California suffered about the same time. 


* “Smoking, which is always ‘strictly prohibited.’ has* caused many fires. Cases are 
known of men leaving the rig and going some hundred yards away for a surreptitious 
smoke. A gentle breeze has carried gas heavier than air in the same direction, and the 
striking of a match has ignited it, resulting in a flareback to the’ well which then caught 
fire.”’—“‘The Petroleum Industry,” Institute of Petrol. Technologists, 5 John St., Adelphia, 
London, W. C. 2, Eng. 

“Danger in Oil Fires Analyzed,’’ chief engr., by R. G. Hamacker, Humble Oil & Rfg. 
Co., Oil and Gas Journal, October 15, 1925. An excellent article on ‘‘Lightning Protection,’’ 
by Ralph J. Reed, chief engr., Union Oil Co. of Calif., appeared in the Lon Angeles Oil 
Bulletin, January, 1925. s 

+ The oil industry’s 8-year fire loss, 1918-1920, aggregated only $14,000,000.—The author, 
while in the Ene. & Geol. Dept. of the Union Oil Co., 1910, made a map of this 300-acre 
tank farm situated 8 miles from the sea, at San Louis Obispo.—More than twice as much 
heavy oil was burned in these two California fires as was consumed at the 4,000,000-bbl. 
farm of the Texas Co.. at Humble in 1905. 


OILDOM: ITS TREASURES AND TRAGEDIES 329 


CONSERVATION THROUGH COMBINATIONS 


Larger Units Favor Welfare of Workers. Conservation of capital, as 
indicated later, is not the only treasure obtained through proper corporate 
combinations. The various advantages of mergers have been summarized 
by a high Government official in the following language: “The Government 
approves of mergers that promise to cut cost of production, promote exports 
and benefit consumers. That competition must be met from low European 
wages during less prosperous times is fully realized. The object of the 
Government is to help maintain a more than living wage. The thrifty 
wage earner is entitled to a surplus the same as the corporation, the banker 
and the broker. This means continued prosperity, for without reasonable 
wages to consume the country’s products, the result would be idleness. 
Little units have a hard time making money, and this means that they have 
trouble paying good wages. The Nation’s growth is so rapid that larger 
units are essential to the welfare of the people.” * 


Memorable Period of Mergers. During the period 1917-1923 were born 
numerous would-be oil companies. Some survived and prospered so long 
‘as their undrilled acreage lasted. Few of the concerns confined to the 
production of crude did so well as those which also refined and marketed 
their products (page 103, “vertical monopoly’’). Recognizing the benefits 
of a balanced organization, a number of the new companies combined in 
groups of two or three. The greatest era of corporate merging came in 
1925 and continued into 1926. There were oil deals galore back in 1900-1902, 
but together they did not compare in volume or value with the seven most 
significant acquisitions and groupings of 1925-1926. 


Seven Groupings Aggregate $600,000,000. By September, 1926, seven 
recent transactions involved the transfer of about 325,000 barrels daily yield 
of oil and of some $600,000,000 in cash and securities, as shown in the table 
herewith. 


DATA ON SEVEN ABSORPTIONS AND MERGERS COMPLETED, 
MARCH, 1925-SEPTEMBER, 1926 


Daily 
Companies Where operating crude Millions New owners 
Pan American ........ Mexico, U. S. and Standard, Ind. ; Chase Nat’] 
Peele Coren sae cesen Venezuela 145,000 $35. Bank, Blair & Co., etc. 
Magnolia Pet......... Okla., Tex., Ark. 35,000 98 Stand., N. Y., incr. to 100% 
Ventura Consol. and- California Petroleum Corp. 
Mohawk oa :osc. chen California 10,000 18.7 
Woatte’ Pilling). co... - Kans., Okla. 11,500 25 Barnsdall Corp. (Blair) 
Paciinet Or sees prercs.e.c California 55,000 200 Standard Oil of Calif. 
Associated Oil ....... . Calif., Mex., Tex. 50,000 150 Tide Water Associated 


General Petrol......... Pacific Coast 30,000 70 Standard Oil of N. Y. 


Few Motives for Mergers. An analysis shows three causes for the recent 
epidemic of combinations: (1) The desire for greater reserves of unmined 
oil to insure non-interruption of operations (Pacific Oil increased Standard 
of California’s potential to 180,000 bbls. daily, and Associated boosted Tide 


* Wall St. Journal, March 23, 1926. An editorial in The Mining Congress Journal, July 
1926, read in part: ‘‘We have found no evidence of public resentment against consolida- 
tions in industry necessary to insure continued prosperity and growth. * * * People 
begin to realize that the greatest relief that may be expected from present high prices for 
necessities will come through business combinations needed for reducing overhead costs and 
costs of marketing, and to eliminate waste of economic effort through better coordination 
of agencies of production and distribution.” 


330 OILDOM: ITS TREASURES AND TRAGEDIES 


Water’s current yield from 16,000 to 66,000 daily); (2) the need of better 
balanced operations geographically considered; (3) the necessity of round-— 
ing out activities “vertically” so as to have complete control from the oil 
field to the filling station (Waite Phillips with its Mid-Continental produc- 
tion of crude and natural gasoline as well as marketing facilities supple- 
mented Barnsdall’s bold wildcat operations extended to California and even 
Russia) .* 

East Weds West. An even more harmonious union than the California 
combination of Pacific and Standard + was made when Tide Water took unto 


KENNETH R. KINGSBURY 


President, Standard Oil Company of California 

A “Buckeye”? by birth in the Centennial year, he be- 
ban kis petroleum career in Pennsylvania with the 
Standard Oil Co. in 1897 after graduating from Prince- 
ton and specializing in mining engineering at Columbia. 

When the dissolution decree went into effect in 1911, 
he was made vice president of the Standard Oil Co. of 
Calif. He became its president in 1919, and under his, 
able administration the company has earned fully $260,- 
000,000 net for dividends and surplus in eight years. 
His company ranks third among Standards in dividends 
paid since 1911. His latest ‘‘coups d’état’’ was the 
absorption of Pacific Oil with its huge reserves, making 
the new Standard of California by far the strongest 
operator on the Coast, with assets valued at over 
$600,000,000. 


—Oiu Bulletin. 


itself Associated in March, 1926. Although having but two-thirds the re-- 
fining capacity of the other, Tide Water turns out a greater variety of 
products from its big Bayonne (N. J.) plant and is much better known — 


*See ‘Huge Mid-Cont. Mergers Strengthen Industry,’ D. W. Moore in Oi Trade, Fe- 
ruary, 1926: “‘Since 1919 the oil business has been carrying much deadlocked material— 
inflated capital, overstocks of equipment, idle refineries and pipe lines, etc.—largely accu- 
mulated as a result of bad judgment and the idea ‘‘every man to himself.’’ See also Oil and 
Gas Journal, January 12, 1926, p. 88, and Wall St. Journal., June.28, under ‘‘Oil Mergers 
Based on Need For Crude.”’ i. 

+ The greatest grouping was that of Pacific Oil and Standard of Calif., which made the 
new Standard second only to Standard of N. J. in the market value of securities and also 
in surplus as of December 31, 1925. The merger was announced December 24, 1925, by 
President Kingsbury of the Standard. Paul Shoun, formerly president of the Associated 
and now vice president of the Tide Water Associated, was quoted in the Phila. Public Ledger: 
‘“‘All who have studied this important consolidation must be convinced that it will serve the 
public beneficially. It promotes economics in operation, helps place oil and its products in 
markets most needed with the least cost in money and time, reduces the amount of oil un- 
available through transit and storage status, gives increased facilities for resolving crude 
petroleum into products according to the Nation’s needs; in short provides conservation 
in the best possible way.”’ 

Axtell J. Byles, pres. of the Tide Water Associated, in the N. Y. Times, April 18, 1926: 
“The consolidated company will be in a more favorable to expand the huge export trade 
in Eurove and the Orient. Through acquisition of the California properties products 
heretofore shipped from the Atlantic coast to the Orient will in the future be sent from 
the Pacific, thereby shortening the distance by some 3,000 miles and thus releasing tankers 
for other markets.”’ 


Koo 


Lee ele 


OILDOM: ITS TREASURES AND TRAGEDIES 331 


abroad. The bulk of Associated oil comes from comparatively few wells in 
California, while Tide Water obtains its 16,000 bbls. from 5,000 wells scat- 
tered over the Appalachian field, Illinois and the Mid-Continent. The com- 
bined fleet of 17 tankers has a carrying capacity of almost 1,000,000 bbls. 
In 1925 the two produced and purchased 7 percent of the United States 
output of crude. Their products sold for $150,000,000. The sum of their 
net profits available for dividend and surplus approximated $17,700,000, 
or 11.8 percent of gross sales. On December 31, 1925, the ratio of current 
assets to current liabilities was 4.8 to 1, reflecting a sound financial condi- 
tion for the combination. 


General Petroleum to Standard of N. Y. Having previously (in 1925), 
taken entire control of Magnolia Petroleum * with its 30,000 or more daily 


—Oil Bulletin. 
THREE DISTINGUISHED CALIFORNIA OIL MEN 


At the left is E. J. Miley, president of the Miley Oil Co. and the State Consolidated 
Oil Co.; in the center, L. P. Si. Clair, vice-president, Union Oil Co. of California, and 
at the right, Mark L. Requa, ex-director, Oil Division, U. S. Fuel Administration, 1918-19, 
and one time chairman, valuation committee, Independent Oil Producers Agency of Cali- 
fornia. A fourth Californian, E. W. Clark, is now (1927) president of the American 
Petroleum Institute. 


yield in the Gulf Coast and Mid-Continent (at a cost of $98,000,000 for the 
remaining 30 percent minority interest), Standard of New York proceeded 
in the spring of 1926 to absorb the 10-year old General Petroleum, a com- 
plete California unit with a like amount of crude production (at a cost 
estimated at $70,000,000). These additions increased the assets of the 
Standard of N. Y. to a total of about $600,000,000, and in this respect made 
it second only to the Standard of N. J. Magnolia assets had been rated at 
$225,000,000 and those of General Petroleum at $115,000,000,} thus leaving 


* Magnolia was formed April 24, 1911, by the late John Sealy who owned refineries at 
Beaumont and Corsicana. Capital stock of $2,450,000 was increased to $188,000,000 by 
March 11, 1924. Greatest impetus came with the purchase of the McMan Oil Co., January, 
1917, with 25,000 bbls. daily yield and 2,000,000 bbls. in tanks for $16,200,000. See Wall 
Street Journal, March 3, 1926. ‘ 

+ General Petroleum was built up by Capt. John Barneson and Sons, L. T. and J. L. 
It reached a peak of 56,000 bbls. daily in June, 1923. It developed wholesale distribution 
from San Francisco to Seattle. (See footnote on next page.) 

President Herbert L. Pratt issued this statement about the middle of April, 1926: 


3382 OILDOM: ITS TREASURES AND TRAGEDIES 


other assets of the N. Y. Standard at about $260,000,000, mainly in the form 
of refining and marketing facilities with numerous foreign stations. 


EARNINGS OF THE ENTIRE INDUSTRY 


Various Sources of Income. Income from oil may be derived by indi- 
viduals or corporations considered either as operators or as outsiders. A 
farmer may receive bonuses, rentals and royalties without incurring risk 
or expense. A lot owner in a city may do the same and a realtor may sell 
land at a profit due to the nearby discovery of petroleum. A broker may deal 
in leases, royalties and oil shares. These outsiders take few, if any, chances 
and invest little or no capital in oil ventures. Their income may rightly 
be regarded as outgo from the regular oil business and as an element of 
cost not to be overlooked. Operators within the oil world receive income 
from various sources or activities: (1) Sale of leases or subleases; (2) 
over-riding royalties; (3) oil production; (4) casing head gasoline; (5) 
sale or rent of used equipment; (6) pipe line transportation; (7) tank farm 
storage; (8) rent of tank cars; (9) marketing purchased crude; (10) 
refinery operation; (11) domestic retailing of products; (12) export trade; 
(13) jobbing. Nearly 90 percent of the operators produce and sell crude 
only. 

Comparative Income. Corporation business of all kinds in the United 
States aggregates annually 100 to 120 billion dollars—hardly one-third of 
our national wealth but 10 times the yearly value of our agricultural prod- 
ucts. According to Richard F. Grant,* the 100 billion is made up as fol- 
lows: Manufacturing, 60 billion; trade, 31 billion; mining, 6 billion; con- 
struction, 3 billion (8 billion in 1926). Crude oil, a product of mining, 
brings 1.2 billion; manufactured forms of petroleum hardly 38 billion at 
the refineries, but after delivery here and abroad must sell for a sum 
between 4 and 5 billion dollars (pages 82-86). The ultimate gross income 
of the oil industry is not excessive considering the expenditures involved for 
its maintenance—from the finding of new deposits to the modernizing of 
its manufacturing plants and the construction of new filling stations for 
the public. 

Net Income from Producing and Refining. While the relatively hazard- 
less refining branch of the oil business has been paying profits, largely 
because of its greater efficiency, the crude oil branch has again been doing 
otherwise, beginning with a price slump in 1921. Balancing the total of 


“Standard Oil Co. of N. Y. and its subsidiary have created intensive distributing facilities 
in (certain parts of the United States. * * * It has also developed widespread facilities 
in China, Japan, India, Philippines, Java, Straits Settlements and the Near East which 
represent a large investment. While it has created this extensive. marketing organization, 
* * * it has neither enough crude production nor adequate refining capacity to furnish al! 
the petroleum products which it markets. * * * General Petroleum, on the other hand, 
has extensive producing properties in the California field which in 1925 produced about 
10,000,000 bbls. of crude besides buying 15,000,000 bbls. * * * It has refineries at Los 
Angeles which in 1925 handled 18,000,000 bbls. of crude oil. It has marketing facilities 
* * * on the Pacific Coast. The business of the two companies is therefore comple- 
mentary.”’ 

* President of the Chamber of Commerce of the U. S.- See ‘‘The Case for the Investor,” 
Nation’s Business, February, 1925. Income at the refineries totals about the same as the 
annual Federal taxes while the retail market value of the many petroleum products (page 
58) approximates the amount of money in circulation (about $4,800,000,000) or the com- 
bined value of the corn and cotton crops. 


OILDOM: ITS TREASURES AND TRAGEDIES 333 


corporation deficits against the total net income of the successful corpora- 
tions gave a net income of 153 million dollars in 1919, disregarding the 
income and deficits of the many individual producers of crude oil; in 1921, 
a net loss of almost 82 million dollars; in 1923, a net loss of 142 millions, 
and in 1924, a net loss of 24 millions. Combining the balances of the crude 
oil branch with that of refining, gave a total income of 318 million dollars 
in 1919 in contrast with a net deficit of 29.5 millions in 1923 and a net 
income of 166 millions in 1924, based upon “Statistics of Income,” by the 
Bureau of Internal Revenue. In 1925 the aggregate net income of the 65 
leading operators approximated $650,000,000—probably between 14 and 16 
percent of their gross revenue. This included income of transportation and 
marketing subsidiaries and was much greater than in 1924. The 1919 
Federal figure for the profit was 18.2 percent of the combined gross of 
almost $2,400,000,000, and the 1923 loss amounted to 1.06 percent of the 
$2,772,000,000 gross income. 

Refining More Stabilized Than Producing. The foregoing emphasizes the 
facts well known within oildom circles: (1) That oil production,is the pre- 
carious division of the industry having lately proved profitless during a 
period of three consecutive years although a times yielding good returns 
(20 percent in 1919) commensurate with the admittedly high hazards, and 
(2) that the refining division is the more stabilized, rarely (if ever) reveal- 
ing an absolute loss as a whole, but generally returning good profits to the 
various operators, particularly those of the vertical monopoly type whe 
possess their own marketing facilities. 


—Standard Oil Bulletin. 


SALES FORCE OF THE CALIFORNIA STANDARD 

These are the men behind the marketing guns, who, under the generalship of the late 
J. C. Fitzsimmons, made their concern the leading distributor of petroleum products on 
the Pacific Coast. 

How to Increase Gross Income. The ultimate income to the oil industry 
may be magnified in various manners: (1) By increasing crude production 
and refinery runs consistent with demand; (2) by procuring better prices; 
(3) by multiplying the recovery of the more valuable products at the 
expense of the others; (4) by controlling utilization so that no petroleum 
product may compete with cheaper or more abundant commodities such as 


334 OILDOM: ITS TREASURES AND TRAGEDIES 


coal. The procural of good prices has already been considered under “Mar- 
gin Between Cost and Market Value.” Points (3) and (4) have been very 
nicely treated by Roland B. Day, who advocates more universal cracking of 
heavy oil into gasoline and the removal of 230 million bbls. of fuel oil from 
competition with coal, thereby enhancing the gross income above cost of 
crude by $198,000,000 per annum.* 


INCOME AND PROFITS OF LEADING OPERATORS 


How Profits are Determined. ‘Gross income” is the most comprehensive 
term since it takes in “gross earnings” from all regular operations as well 
as incidental and occasional revenue from various sources, such as interest, 
rent and sale of property (see “Earnings of the Entire Industry”). Not 
all oil companies publish the amount of their gross earnings or sales with- 
cut deducting “cost of materials.” Operating, general and administrative 
expenses are deducted from gross to get “net earnings.” Then come “adjust- 
ments,” plus or minus, of crude and refined inventories according to the 
market (on December 31 of each year), if these are not carried on a cost 
basis. The next step is to set aside additions to reserves for “depletion 
and depreciation” before taking out the amount for Federal taxes. The 
result represents “net income” as recognized by the Treasury Department. 
After reserving the Government’s share the remainder is designated as “net 
earnings after depletion, depreciation and Federal taxes” or simply “net 
(available) for dividends and surplus” equivalent to “net profit.” 


—The Oil & Gas Journal. 


“DESERT SHIPS” DRAW “CARGOES” OF AMERICAN PETROLEUM. PRODUCTS 
ACROSS DRY STRETCHES IN AFRICA AND AUSTRALIA 

Camels do not always carry loads on their backs. In this view is seen a large wagon loaa@ 

of case cil hitched to a string of these hardy quadrupeds. As here implied, the Standard 


as well as other American companies doing business abroad, incorporate their foreign sub- 
sidiaries in the lands where they operate. 


Earnings Cover Operations Abroad. The financial statements of only a 
few operators reveal the rate of gross earnings. The following figures, 
in millions, for 1925 largely represent gross sales, include indirect income 


* “Economic Aspects of Cracked Gasoline,” Oz and Gas Journal, November 26, 1925; 
reprinted with other related papers in book form by Universal Oil Products Co. (owners 
of the Dubbs cracking process), 310 So. Mich. Ave., Chicago. 

Read ‘‘A Producing Program for Profits,’ address of George Otis Smith before the Inter- 
national Petroleum Congress, printed in The Oil Trade, November, 1924. 


OILDOM: ITS TREASURES AND TRAGEDIES 335 


from pipe line transportation and in the case of the first named consists in 
a great measure of subsidiaries’ earnings, notably from natural gas oper- 
ations. 


Standard of New Jersey............ teeaae. PAE AAT GLC PREC OP ANT Pees Geet oes fatal abe tots, pce e 138.0 
Standard of Indianar’}~ 6.6 sche eiverdan 286.0 Witton OilroteCalifece. iets at oven ce oc 74.0 
Gilt ® OUle Cor DOration <j 6 is oss, o her ue sis 215.6 Marland. POT Win sem creates tattle ahsunere 65.0 
hes lexan COm pany sc. ssc cwacts erae ste 208.0 Seu P MU niGn we eee ee ee lene «aie 50.0 
SIMCIATES WONSO Ls wis) cies les o.oo inte olore tbe 160.0 Sir hy hal OF 8 Mee ce AO Oi ee as ne = 49.0 
Tide Water Associated............. 150.0 ie SLL OLE QIOTEI | 6 gn, dis'o's « ie sel bros 36.0 


—Texaco Star. 


AN EFFICIENT SALES FORCE OF AN AMERICAN COMPANY IN CHINA 


Practically all of these as well as the Standards of Calif. and N. Y., Pan 
American, Shell Union and Vacuum, participate heavily in the export trade 
so that an appreciable percentage of their income must be credited to 
foreign sales. 

Comparison of Net Profits. One of the best bases for ranking the oper- 
ators is their total net profits as shown below in millions of dollars. 


Standard Oils TODS 19247251925 Independents 1923 1924 1925 
Srandard, GN atoeam tess fein 2 Horse 81.0 o aeaeZ The:texas Company... «2 a 8.206 2670'- oOo 
Wtandard a Wada ts ose tees 41.5 40.8 52.9 Gulf Oil Corporation...... LATS PE LOZ 7 Sb20 
StanGgara. woalhitia vie< uae tes< ob. SawoD.6 43.6 Shell Union Oil] Corp...... 16.9 18.6 20.4 
rohit: aq (oes Ses UM FON ange ee ee 15200 e220 41.6 Tide Water Associated..... RG ser Ooms t 
PaAneAmenicen Fa Gal oo. 20.4 16.2 Dike Marland Oil aGoc. sees nse 0.35 14.8 
Nie trot OTs GO) cee tena Ney Rive 24.2 H raD Ae eek OFAN FRI pra as Roe ee LA od OLGhD2t9 
Humble Oil & Refining.... 5.1 9.8 22.6 Phillips Petroleum, ¢..,.. . 4.6 (ran bas 
Prairie Oil & Gas. 77.00)... Ssh 10ss 15.8 Union Oil Co. of Calif..... B.0 1 Oe Os8 
Magnolia Petrol Co...... 8.1 8.5 mt Mid-Continent Petroleum... 3.8 1.4 TA) 
OnIGFOME CO. oka Noktcoen 6.1 4.5 9.4 General Petroleum ..... a. 6.0 8.3 6.4 
DEAnGarcd eV. wideion ss tecka 5.5 5.4 7.5 California Petroleum ...... 6.7 3.5 6.3 
Atlantic. Refining... 5 ./:4.:i6 0.8 4.7 tee Sinclair Consol... Oil........ def. def. 6.0 
Standard, Nebr...... tee a 5.5 5.4 hae Mtn. Producers Corp...... 6.9 6.4 pM 


In the above table the net earnings of the Pacific Oil Co. have been included for the 3 
years with those of the Standard Oil Co. of Calif. although the merger was not announced 
before December 24, 1925. Profits of Magnolia Petroleum Co. in, 1925 have been combined 
with those of the Standard of N. Y., which in that year increased its control from 70 to 
100 percent: but those of General Petroleum have been excluded since this California 
operator was not absorbed before May 17, 1926. 


With only one exception all of the 26 companies listed above did incom- 


336 OILDOM: ITS TREASURES AND TRAGEDIES 


parably better in 1925 than in 19238, the year of most phenomenal over- 
production. Marland Oil showed 770 percent improvement, and Atlantic © 
Refining, 800 percent. Very few failed to better their 1924 earnings. 
Among minor companies the 1925 net profits were as follows, in millions 
of dollars: Tide Water alone 6.0, Salt Creek Producers Association 4.6, Con- 
tinental Oil Co. 4.8, Pan American Western Petroleum 4.2, Skelly Oil 3.8, 
Sun Oil 3.6, Barnsdall Corp. 3, Standard of Ohio 2.97, American Republics 
2.86, Simms Petroleum 2.64, Independent Oil & Gas 2.56, Amerada Corp. 
2.50, General Asphalt 1.52, White Eagle Oil & Refining 1.47, Houston Oil 
1.25, Louisiana Oil Refining 0.87, Transcontinental Oil 0.79, Galena Signal 
Oil 0.59, Standard of Kans. 0.49. For net in 1926 see page 367. 


Net Profits per Share of Common. For investment purposes this means 
more than the total profits if income available for dividends and surplus is 
the main desideratum. Designated as “Per Share Earnings” in the leading 
financial newspapers, Barron’s and The Wall Street Journal, these have been 
combined in the table below: * 


Companies 1923 1924 1925 Companies 1923 1924 1925 
Amerada Corp.......... $3.11 $2.85 $4.24 Pure) Ouse eee $3.57 $3.10 $3.70 
Associated Oil ......... 3.39 2.85 4.67 Salt, Creek Prodaceeeee 4.60 4.18 3.09 
Atlantic Refining....... nil 6.59 11.53 Shell Union Oils. sa... 1.84 1.74 1.86 
Barnsdall Corp......... 0.14 1.52 3.29 Simms Petroleum....... =.0b> 2.82 —. 3.85 
Calif. Petroleum........ 5.65 2.96 3.26 Sinclair’ Consol s3e soe nil nil 0.95 
General Asphalt........ 3.56 6.04 5.78 okelly Oiltvs << erence 1.36 0.05 4.43 
General Petroleum...... HEDGE ariel 5.49 South: Renn .Oilteaeoeee Nive se 87 
Gulf Orn? Corpse os 3.29 4.40 7.99 Standard WCaliie ys een DAS Lee 3.46 
Houston2Oiut72 see 3.97 8.93) (238750 standard, And vecssesee 4.68 4.55 5.84 
Humblej Oise cirRties 7. 2589) 1b 625. 12295 StandaraacKy.5 aeeeecrete QZ 2 iO San Os0.4 
Indep. Oil & Gas....... 1.62 1.42 5.12 Standard Nit dso 2.10 3.30 4.72 
Marland¥Ona scene ae 1.52 0:23 280 Standard, UN:-Y sop 1.66 2.42 3.62 
Mid-Continent Pet...... Nilowec Oe Oh e4.68 Suni Oho aes 1.38 1.90 3.40 
OhioM Osteen 2.54 -1.90 <°3.90:- (Tex: Baer C2 G&G Onna nil 04 .86 
Pacihie “OW ese ees 2.55 8.40 4.70 The Texas Coe scone 1.24 4.02 6.02 
PanvAm sub asian es 7.96 5.67 9.95 Tide “Water? Oil. 24 145 ocleOo 2.81 
Pan Am. Western..:.... ates 4.34 8.47 Union: Oile Cality ose 2-23 Vets yi urate: 
Phillips Petroleum...... 3.92 3.82 5.12 Vacuum Oiler ence 5.42 7.02 9.73 
Prairie Oil :& Gas...:;. 3.68 4.30 6.58 White Eagle O.& R.... 2.938 2.24 3.04 


A par value of $25 a share appears to be popular with oil companies, and 
in line with the extension of stock ownership among employes there has 
been noted a recent trend to reduce the original par of $100 to the smaller 
unit. Among those who retain the $100 par value are Atlantic Refining, 
Houston Oil and South Penn. A limited number have not assigned any par 
value to their common stock. Otherwise comparisons may be made in the 
above table both vertically and horizontally. In the latter way it will be 
seen that the figures reflect a remarkable recovery of practically all these 
companies from the depressed condition prevailing in 1923. Only three of 
the 38 were guilty of backsliding. 


Ratio of Profit to Par a Superior Criterion. Of greater significance to the 
investor who may not be satisfied with the combination of greater safety 
with smaller rate of return (offered by older operators), is the percentage 
which the net for dividend and surplus makes of the par value of the com- 
mon. From the foregoing table, with the knowledge of the par value, the 
rate of return may be calculated quickly (see end of chapter). However, 
if the market price is below or above par, as it usually is, the new buyer of 
stock must calculate rate of yield on other than par value. Among the 


* See chart of 50 oil companies published by Ward, Gruver & Co., 20 Broad St., N. Y. 
+ On basis of the new $25 par value instead of the old $100 par, for the sake of uniform 
somparison. South Penn changed to $25 par early in 1927. 


OILDOM: ITS TREASURES AND TRAGEDIES 337 


higher rates for 1925 may be mentioned 52 percent on par for Humble, 
39 for Vacuum, 38.5 for Simms, 31.8 for Gulf, 31.3 for Pacific, 30 for 
Phillips, 24 for Texas, 23.4 for Standard of Indiana, 22.3 for Marland, about 
20 for Pan American Petroleum & Transport, and nearly 19 for Standard 
of N. J. Rates not quite so good include those of Pure Oil, 14.8 percent; 
Standard of N. Y., 14.5; California Petroleum, 14; Barnsdall, 13.2; Stand- 
ard of Calif., 13; South Penn, 11.9; Atlantic Refining, 11.5; Tide Water, 
11.2, and Union Oil of Calif., 11. 

Dividend Rates More Regular. While the earning rates on par in 1925 
ranged from 52 percent for Humble down to 1 percent for Sinclair, the 
dividend rates did not depart so very much from the average, disregarding 
the companies that pass dividends for an entire year. In 1925 Standard 
of Nebraska and Vacuum paid at the rate of 20 percent on common, 
Standard of Kentucky at 16, Shell Union at 14, The Texas Company at 12, 
and the following at 10 percent: Continental, Ohio Oil, Standard of Indiana 
and Standard of Ohio. California Petroleum, Pure Oil, Prairie Pipe Line 
and Standard of California paid 8 percent. Union Oil of Calif. distributed 
at the rate of 7.2 percent on its issued common stock, Atlantic Refining at 
7 percent on its preferred and none on common. Gulf Oil and Marland 
each at 6 percent, and Standard of N. J. at only 4 percent (see end of 
chapter). 

1925 Swelled Total Treasures in Dividends. Dividend payments during 
1925 probably totaled a little more than those of the preeminently pros- 
perous year 1920, and have never been equaled in any other year. Improve- 
ments over 1924 were not restricted to any one area nor to operators in 
any particular branch of the industry. At least 10 companies paid extra 
dividends in cash or stock. Three other sources of larger payments were 
increased dividend rates by 9 or more companies, resumption of dividends 
by a few, and the making of initial payments by others. The only im- 
portant omission was the passing of two quarterly payments by Prairie 
Oil & Gas. Like a few others, its best years were 1919 and 1920 in each 
of which it. paid $5,040,000 or 28 percent on its capital stock.* The five 
foremost dividend-payers in 1925 were: Standard of N. J., 14 million on 
preferred and 20.4 million on common, making total of 34.4 million dollars; 
Standard of Ind., 22.5 million; The Texas Co., 19.7 million; Standard of 
Calif., 18.9 million, and Pan American P. & T., 16.5 million. Other im- 
portant payers (on common) included: Standard of N. Y., 14.3 million; 
Shell Union, 14 million; Vacuum, 12.4 million; Pacific Oil, 7 million; 
Gulf Oil, 6.6 million; Ohio Oil, 6 million; Marland, 6 million; Pure Oil, 4.9 
million (plus 1.7 million on preferred, making total 6.6 million) ; Associated, 
4.2 million. The Texas Co. leads all independents with a total of $210,- 
000,000 paid to the end of the third quarter of 1926. Since the dissolution 
of 1911 the leading Standards had disbursed the following totals (in 
millions) to the middle of 1926: 


* Reduced to 8 percent in 1923 and 1924 following a 200 percent stock dividend in 1922. 
On cash dividends are considered here: the subject of stock dividends will be taken up 
in the next edition of this book and possibly in a separate volume devoted exclusively to 
petroleum finance and commerce. 

Standard of Ind. promises to distribute $33,000,000 in 1926 to its numerous stockholders. 
This should be within $2,000,000 of both preferred and common dividends that will have 
been declared by Standard of N. J. in 1926. See Wall Street Journal, November 17, 1925, 
May 24, 1926, August 16, 1926; also ‘‘Dividends from deficits,’ Barron’s, August 30, 1926. 


338 OILDOM: ITS TREASURES AND TRAGEDIES 


Standard, (Ned. 2 epid settee ee eas 88.2 Prairie: Pipesit4 ves bask ee 63:5 
Standard,] Naw Jey COM ae iene casters so hee eu S Prairie (O.&' Gone ee eee ee BLS * 
Standard Imds comics irekcevottins tes cee 174.8 Magnolia is .c. Reh eae PAU poe alee 43.8 
Standard se: Galilee eae Riise cioealato tie 158.8 Vacuum: Olt 286 ce See ee eee 36.6 
Standard avn Vesa hs hoeedaccm aeheee 136.8 Standard, Kyocii. ice ccs cae eee 18.0 
Ohio OUR aa Se Ba ae or Be Ieee 12253 Humble! \6oc8e is i ee 15.8 


) 
N 
N 
\ 
\ 


Es: 


A TYPE STUDY IN OIL—THE TEXAS COMPANY 


Reasons for Selection. This concern was chosen for the type study in 
this edition because (1) it has a splendid reputation, (2) represents the 
independents, (3) operates in all but three states, (4) is best known abroad 
next to the New Jersey and New York Standards, (5) has enjoyed a healthy, 
steady, harmonious growth for over 25 years, (6) is unusually well bal- 
anced, (7) has officials of high character, broad minds and friendly feelings 
toward the helpful activities of the Government,* (8) is physically and 


*In 1922 the general counsel of The Texas Co. was selected by Uncle Sam to serve on 
a high commission requiring courage, tact and dispatch. The N. Y. Tribune contained one 
of many complimentary editorials: ‘‘President Harding’s nomination of an able Democrat, 
Attorney Edwin B. Parker, to the General German Claims Commission, shows a spirit of 
generous non-partisanship. The appointment is wholly admirable * * *,”’ 

“All for Each—Each for All’’ is the motto of this great corporate family. “Its affairs 
cover the entire range of the petroleum industry and extend over the face of the earth.”— 
Editor Lefevre in The Texaco Star, October, 1922. ‘‘Around the World with Texaco,” is the 
title of a book by the globetrotter, C. S. Dennison. It is popular with pupils and teachere 
who like real and recent geographic facts liberally illustrated. 


OILDOM: ITS TREASURES AND TRAGEDIES 339 


financially strong enough to withstand the worst winds, (9) is famous for 
its efficiency and (10) pays annual dividends of almost 20 million dollars or 
little less than either one of the two leading Standards, considering common 
stock. 


Born at Beaumont in 1901. Its predecessor, The Texas Fuel Co., was 
“spudded in” near Spindle Top (pages 40-41 and Chap. VIII) but 77 days 
after the great Lucas well began to belch forth. The Texas Co. was incor- 
porated April 7, 1902, with a capital of only $3,000,000 and only 119 stock- 
holders. Natural growth caused successive increases in capital which has 
been $164,450,000 par since 1921.* The stockholders numbered 32,826 in 
September, 1926. The original roll of 12 employes grew to 27,000 by 1920. 
In 1917 the company was authorized directly to produce oil, so the Pro- 
ducers’ Oil Co. was dissolved. About the same time the Texas Pipe Co. 
and the Texas Pipe Line Co. of Okla. were formed, also The Texas Co. of 
Mexico. The big event of early years was the 1903 purchase of Sour Lake, 
the pool which to 1926 produced more oil than any other in the Gulf Coast 
field except Humble. The company’s development of its 800 acres brought 
Sour Lake up from 45,000 bbls. in 1902 to 8,848,000 in 1903 (then half the 
output of all Texas).{ Operations were extended into Oklahoma with the 
opening of the Glenn pool (1906) and intensified with the deeper (Bartles- 
ville sand) development in the Cushing district (1914). The pipe line from 
West Tulsa to Port Arthur was built in less than 5 months (by June, 1907), 
but the most sensational scene was laid in July, 1920, at West Columbia, 50 
miles west of Galveston. Here the company during one week produced from 
a single well oil worth $80,000 daily and reaching a maximum rate of 33,000 
bbls. daily, probably the most profitable producer for any six-month period 
in history. (See view of Abrams No. 1, page 320.) 


A Few Physical Facts. Usually but 10 percent of controlled acreage is 
cwned by an oil company in fee. The Texas Co., however, in 1925 thus 
held almost 30 percent of its 1,690,000 acres. Its 3,114 domestic wells aver- 
aged 18.7 bbls. per well per day; its 23 Mexican wells 88.2 bbls., making a 
combined average of 19.2 bbls., nearly thrice the average for all the 306,100 
wells in the United States, December 31, 1925. Of 453 domestic wells com- 
pleted that year 27 percent proved dry; of 7 Mexican, 57 percent. In 
1925 about 21.2 million bbls. of crude oil were produced and 21 million 
were bought in the United States; respectively %4 million and 2% million 
in Mexico. Of the total, 45.4 million bbls. 34.4 million were run through 
the company‘s refineries in Illinois, Louisiana, Oklahoma, Pennsylvania, 
Texas and Wyoming. Gasoline recovery increased from 40 percent of 35.9 
million bbls. in 1924, to 44 percent from 34.4 million in 1925. Pipe lines 
now measure almost 5,000 miles and the tankage, 40,000,000 bbls. The 
company owns or leases 5,400 tank cars which each averaged 11,400 miles 
of travel in 1925. Its 19 steam tankers and 4 motor vessels carry yearly 
about 3.5 million tons or 20,000,000 bbls. of oil.+ 


— 


*In the fall of 1926 was created the new corporation, The Texas Co. of Del., with 
$250,000,000 authorized capital. This harmonizes better with its huge assets. 

~ Further details in Texaco Star, April, 1926; Barron’s, March 8 and May 10; Wall Street 
Journal, April 25, 1924, under ‘“‘Texas Company Tells Operating Story: First of Large Oil 
Companies to Outline in Detail Operations in Its Departments.’’ H. G. Lapham, a director, 
stated in Barron’s, December 20, that late in 1926 refinery runs and reruns totaled 140,000 
bbls. daily, six-sevenths at the Port Arthur plant. 


340 OILDOM: ITS TREASURES AND TRAGEDIES 


Financial Information. Only one other independent had a gross income 
in 1925 greater than the $208,000,000 of The Texas Co. Deducting 
$48,600,000 for cost of materials left a little less than $160,000,000 as the 
earnings. Operating expenses approached $90,000,000, and after allow- 
ing for depletion and other deductions, including dividends of $19,700,000 
there remained a surplus which added to that of 1924 ($95,200,000, less 
adjustments) brought the surplus up to $113,500,000 on January 1, 1926. 
Following is the consolidated income statement for 5 years, values expressed 
in millions as of December 31 of each year: 


1921 1922 1923 1924 1925 


Gross ‘earnings “during yearuae . ie cece ee ae $102.6 ‘$131.0 $118.4 $139.6 $159.4 
Operating: “expenses ete sere ie ee es eee 73.0 80.6 87.5 89.1 89.4 
IN Gt Car MIN SS rece cilse cia oe er eee ee eee $29.6 $50.4 $30.9 $50.5 $70.0 
Changes in crude inventories, etc..............-.0% 10.6 7.4 6.5 4.8 8.3 
Depletion; déepr.; “hederal@taxesiis: cue eee ee ee 37 16.4 16.2 19.2 Papi k 
Net income for dividends and surplus......... $9.3 $26.6 $8.2 $26.5 $39.6 
Previous surplus “wath cadjustments!.. 6 os see ae cle Oo23 88.0 99.9 88.4 93.6 
Balance before dividends. aoe ce eee $101.6 $114.2 $108.1 $114.9 $133.2 
Dividends paid. during Weare... cise eeiciee teens 18.1 19.7 19.7 19.7 19.7 
New-surplus-at: end “of year’s ese cies ees seers $83.5 $94.5 $88.4 $95.2 $113.5 


—Texaco Star. 


MOFFAT DOME, COLO., WHICH THE TEXAS CO. (JOINTLY WITH THE TRANS- 
CONTINENTAL) FIRST DEVELOPED 


All assets of The Texas Co. must approach $500,000,000 in value at the 
close of 1926 considering its rich reserves in 8 states and in Latin America, 
its growing production of over 65,000 bbls|. daily (3 percent of the United 
States total, mostly settled and worth more than the $500 a bbl. carried on 
the books), its refining capacity of about 160,000 bbls. daily (especially the 
huge capacity for cracking by the Holmes-Manley process, and last but not 
least, its world wide good will which has not been capitalized in the records. 
Oil lands and stocks of merchandise are largely undervalued by this modest 


wh el 


OILDOM: ITS TREASURES AND TRAGEDIES 341 


company according to the balance sheet which shows total assets a little 
below $400,000,000. The strongest proof of success is found in the fact 
that net profit for dividends and surplus exceed $300,000,000 to the end 
of 1926. 


BALANCE SHEET OF THE TEXAS COMPANY AS OF DECEMBER 31, 1925 (in millions) 


Fixed Assets: Basic Liabilities : 
Refineries and terminals......... $70.25 Capital stock (common)......... $164.45 
Lands, leases, wells, equipment... he Sy LUSae custete cu ercbereus asters hale ataie' reese 113.4% 
Pipe lines and tank farms....... 52. : ——-- 
Sales stations, facilities, etc...... 41.33 Capital and surplus dete thetshecs $277.92 
Ships and marine equipment..... 29.10 Reserves for depletion and 
Tank cars, other ry. equip....... 5.82 depreciation ............ $96.58 
: LOLP AMOLtIZa tion aa. .es 4 2.43 
Totaletixed: assets). encseie tnt $254.11 99.01 
Current Assets: Mejorm liabilities ies... <n. Ads EBHEER? 
Merchandise, crude and refined... 94.42 Current Liabilities: 
Accounts receivable.............. 19.15 Accounts payable..............-- 14.03 
Cash on hand and in banks...... 18.81 Federal taxes (estimated)........ 4.50 
Storehouse supplies... ....- 2.220. 5.66 Notes nayablen. (c/s o wees ee 1.23 
Notes TECCTV ADE’ cistern anche fon! «ce eho 2.82 Miscellaneous Liabilities : 
Miscellaneous Assets: (a)......... 2.67 Deferred purchase obligations.... .95 
Total assets... .. stared che ere ee $397.64 Mota Weliabiliti]es >: seamed tsa a ioe $397.64 


(a) Securities $1.14 mil. and deferred charges. 


thos 
etic Fee we 


—Texaco Star. 


PART OF THE TEXAS CO.’S TERMINAL AND REFINERY AT PORT ARTHUR 


Review and Recent Events. This company is firmly entrenched financially 
as shown by its modestly appraised assets and its enviable earning record 
of a quarter-century. It has never failed to pay dividends although, like 
other oil operators, its earning in 1921 and 1923 did not cover these require- 
ments. In 1925 its earning rate on par was 24 percent, or far better than 
the average. Its dividend rate was 12 percent. Current events have fore- 
shadowed additional benefits to stockholders. One, has been the boost in its 
gasoline business by the introduction of Texaco high-test motor fuel (see 
Philadelphia Ledger, August 13, 1926). Another has been the purchase 


ITS TREASURES AND TRAGEDIES 


OILDOM 


342 


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OILDOM: ITS TREASURES AND TRAGEDIES 343 


of the Southwestern Petroleum Co. with 7,000 bbls. daily production without 
public financing or issuance of stock although the net cost approximated 
$11,000,000. With a good grip on foreign and domestic trade and with 
working capital (current assets minus current liabilities) close to $125,- 
000,000, the company is advantageously situated for further absorptions. 
Its stock has been very steady on the market, low of 1925 being 42% and 
high, 55; highest price since 1919 being reached on June 23, 1926, when it 
stood at 56, 124 percent above par. At this rate the 6,578,000 shares should 
be worth $368,368,000. No wonder that the new Texas corporation is justi- 
fied on the basis of $250,000,000 capital so as to provide for a stock dividend 
after November 1, 1926. Net income for 1926 was $36,000,000. 


D. J. MORAN 


A Vice President of the Texas Co. Since March 18, 1924 

He is a native of Ohio and a graduate of Case School of 
Applied Science (at Cleveland). He has been with this 
company since 1908, the time of the Glenn Pool excitement. 
Previously he had been attached to the Buckeye Pipe Line 
Co., Ohio Oil Co., and Oklahoma Iron Works. In 1920 he 
became vice president and general manager of The Texas 
Co. of Mexico. 

A. L. Beaty is chairman; R. C. Holmes, president; T. J. 
Donoghue, G. L. Noble, C. N. Scott, W. W. Bruce, vice 
presidents; C. P. Dodge, secretary; C. E. Woodbridge, 
treasurer. 


A QUARTET OF MONEY-MAKERS—TWO STANDARDS, TWO 
INDEPENDENTS 


Combined Assets and Earnings. Many oil companies evidenced their 
highest earnings in 1925 in contrast with the low ones in the lean years 
1921 and 1923. Of the four compared herewith, Standard of Indiana is the 
oldest, having been organized a dozen years ahead of the two independents, 
Gulf Refining and The Texas Co.’s forerunner. The collective gross income 
of these three and Humble Oil and Refining Co. probably totaled between 
800 and 900 million dollars in 1925. Their net profits aggregated $150,- 
000,000 out of which $51,000,000 was paid in dividends, leaving almost 
$100,000,000 for surplus addition. The accumulated surplus of all four 
actually exceeds the cost of the Panama Canal. Assets on December 31, 
1925, totaled $1,534,000,000 or 10 times the net profits. 


COMPARISON OF PROFITS, DIVIDENDS, SURPLUS AND ASSETS FOR 1925 IN 


MILLIONS 
Stand., Ind. The Texas Gulf Oil Humble 
Netatinro fits macercins, «7s tints © aise en thcavateideeuel avec s $52.9 $39.6 $35.0 $22.6 
Dyyaiden ds: Bascererscte cto. tia oS et orcas ees oae.c! thay cbiellaye cues yeritas hee 22.5 TOT 6.6 Dal 
SUrpluseec Ore vd dtr tier ver oetene setters ei « Gideon eae $30.4 $19.9 $28.4 $20.5 
SE OURS TIE US pe LG Ge peo lites ienardseee ae eee Mts olen siokenomens tne tt ie. < $142.1 $113.5 $108.0 $50.8 
Tataltassets,: Deca ol 5c eaicistie eis eats slelelsMalsle ei. carats (a) 451.8 397.6 427.6 (a)256.9 


(a) Accumulated depletion and depreciation reserves for Standard Oil of Ind. and for 
Humble Oil & Refining Co. have been added to their assets appearing in official statements 
in order that comparison may be made with the Gulf and The Texas companies on the 
same ‘basis. Much of this matter has been abstracted from Barron’s for March 29, 1926, 
and supplemented with additional data. 


+ Barron’s, June 14, 1926. + Wall Street Journal, August 28, 1926. 


344 OILDOM: ITS TREASURES AND TRAGEDIES 


Comparison of Capital and Earning Rate. The par value, $25 a share, is 
the same for all, but the number of issued shares is different. Both Gulf 
and Humble carry funded debt as part of their capital liabilities, and until 
1926 Humble owed the additional sum of $31,000,000 (to Standard of N. J.) 
now cancelled through the issue of new. stock, bringing its total up to 
3,000,000 shares. On December 31, 1925, capital and surplus liability for 
each was as follows in millions: 


Stand., Ind. The Texas Gulf Oil Humble Oil 
Number of shares issued..........:.. Mea ie 9.08 6.58 4.4 1.75 


Naluenof-shares) issued apart). ce an ee $226.3 $164.45 $109.77 $43.75 
Bonds -ands notestie eee eee eee none none 42.90 56.00 
Total capital liability................- $226.3 $164.45 $152.67 $99.75 
Capitaliestr plus ee eet acai eee een (a) 63.1 113.47 107.96 50.8 
Capital and surplus,.........:...+..0- $289.4 $277.92 $260.63 $150.55 


(a) Besides $79,970,000 earned surplus, making total surplus $142,070,000. 
COMPARISON OF THE PER SHARE BASIS FOR THE YEAR 1925 


Net “profit. per shares eee ee tees eee ee $5.84 $6.02 $7.97 $12.93 
Dividendssperushares ein ee ee ee 2.50 3.00 1.50 1.20 
INewasurplusepermsharescenuctenti ene 3.34 3.02 6.47 11.73 
Total-surplusepersshareseene ate nee ee 15.70 V2 24.59 29.05 
Total: assets’ per-share. nie ee ene 50.00 60.00 97.00 146.00 
Earnediion)anvested! capital (a)iaac occa tee 11.7% 10.0% 8.2% 8.8% 
Harnedvonscapitalustocion Gb) <a) ee eee cee 23.4% 24.0% 31.8% 52.0% 


(a) Total assets considered as invested capital. (b) Par value of issued stock, thus 
exclusive of borrowed capital. On total capital Gulf earned 23 percent, Humble 22.7 per- 
cent, or less than the The Texas rate. The authorized capital of the new Texas Co. of Del. 
(1926) is $250,000,000. 


A NEW WORLD POWER IN PETROLEUM fe 


Marvelous Growth of the Great Gasoline Marketer. Incorporated in 1889, 
the Standard Oil Co. of Indiana, directed by Colonel Stewart and Doctor 
Burton (Chap. XII), has become both powerful and popular, a rare com- 
bination. Its original capital of $500,000 was successively increased to 
$1,000,000 (1892), $30,000,000 (1912), and $75,000,000 (December, 1920) 
plus $37,360,455 additional (June, 1921) for completing the purchase of 
Midwest Refining, leading Wyoming producer. During 1923 the capital 
issue stood at $221,700,000. In two years it gained less than $5,000,000 
notwithstanding the quasi-acquisition of Pan American (Eastern) in March, 
1925. Assets of the latter have been conservatively estimated at $250,000,- 
000 exclusive of which Standard of Indiana possessed in varied resources 
$406,000,000 on January 1, 1926, making a marvelous enrichment in 37 
vears. It is recognized now as the dominant domestic marketer of motor 
fuel (map, 116). 

Properties and Production. Gaining a great interest * and managerial 
control in the Pan Am. Petroleum & Transport Co. has given Standard of 
Indiana an influential international position with over 1,500,000 acres of oil 
lands in Mexico alone, a daily output of about 225,000 bbls. (Mexico, 140,000 
potential; Venezuela, over 35,000), a tanker fleet of 3,000,000 bbls. capacity, 
and American and foreign refineries with 300,000 bbls. daily. Through its 
Wyoming subsidiary it controls 80 percent of the Salt Creek high grade oil 
besides much undeveloped acreage throughout the Rocky Mountain states. 


* Control only of Class A voting stock of Pan Am. P. & T. Co. (50.2 percent of $50,077,800 
issued. There is also outstanding $52,977,175 of Class B common). Voting control is held 
by a syndicate headed by Stand. of Ind., but in which Chase Securities, Blair & Co., and 
English steamship interests participate. 


OILDOM: ITS TREASURES AND TRAGEDIES 345 


—Rig and Reel Magazine. 


PART OF THE GREAT SALT CREEK FIELD IN NATRONA COUNTY, WYO. 
Uncle Sam, richest royalty owner, receives as high as 3381/3 percent of the oil pro- 


duced from remarkably settled source of light oil. Subsidiaries of the Standard Oil Co. 
of Indiana control most of the output which in December, 1926, was proceeding at the 
daily rate of over 40,000 bbls., with two sands held in reserve. 

Through Dixie Oil it operates in Smackover, the Pine Island field in 
Louisiana, the Papoose and Wewoka field in Oklahoma and in various parts 
of southern Texas. It has access to further supplies of crude through its 
50 percent ownership in the Sinclair Pipe Line and the Sinclair Oil Pur- 
chasing Co. It has the largest investment ($60,000,000) in distributing 
plants, service stations and auto equipment of any oil company. Burton 
cracking stills + have proven a potent factor in the company’s profitable 
operations. 

Standing Among the Standards. If the output of Mexican Petroleum and 
Lago (in Venez.) be claimed in full, then Standard of Indiana in yield of 
crude oil through all its subsidiaries measures up well with Standard of 
N. J., which produced 72 million bbls. in 1925 and ranks ahead of Standard 
of Calif., which produced 53 million that year. Its domestic production, 
however, makes but 30 percent of its total whereas 55 percent of the N. J. 
Standard’s is of domestic derivation and practically all of the California 
Standard’s comes from one source, a single state. In thousands of barrels 
daily refining capacity the leaders rank as follows: Standard, N. J., 380; 
Standard, Ind. (including Pan American’s topping plant at Tampico, Mex., 
and refinery at Destrehan, La.), 300,000; Standard, Calif., 225; Standard, 
N. Y., 153.5; Atlantic Refining, 66; Humble Oil & Refining, 60; Vacuum, 
18.{ The table below makes financial comparisons in millions: 


7 Burton patent rights, leased to various Standards and to Tide Water Associated, has 
brought royalty income so large that five vears ago these rights were appraised at $150,- 
000,000 although not carried as an asset on the bocks. 

% Imperial Oil, Ltd., is the Canadian subsidiary of Standard, N. J. It has a daily refining 
capacity of 45,500 bbls. Its 6,491,852 shares had a market value of $234,500,000 on May 
24, 1926. It owns. 54 percent of the stock in the International Pet. Co., Ltd., worth 
$228,500,000 on the same date. Its potential yield of crude, middle of 1926, was 45,000 
bbls. in Colombia and 30,000 in Peru per day. Since Standard of N. Y. acquired 10 tankers 
through its absorption of General Petroleum, the number of these owned in 1926 were as 
follows: Stand., N. J., 52; Stand., N. Y., 48; Stand., Ind., 31 (Pan American controlled) ; 
Atlantic R., 14. (Standard of N. Y. had 185,000 bbls. refinery capacity at end of 1926, ac- 
cording to Wall Street Journal, January 12, 1927.) 


346 OILDOM: ITS TREASURES AND TRAGEDIES 


Inven- Total Securi- Inven- Total Securi- 
Companies tories assets. ties Companies tories assets. ties 
Standard, iN. Si. .25 $247 $1,369 $1,142 Humble O. & R..... $48 $168 $215 
Standard, Calif...... 68.6 567 713 Prairie O: &&Go.ene 72 154 . 130 
Standard, Ind........ 66.1 406 570 Ohio OM eee eee 30.5 100 140 
Standard, N; Y...... 149 533 480 Atlantic (Riguie secs 36 134 109° 
Macuuml One eere ae oct 144.5 251 Standard; Kiyc ane 8.1 44.5 80 


(Note: Inventories and total assets as of Dec. 81, 1925; market value of bonds and 
stocks as of May 24, 1926.) 

From tables under “Income and Net Profits of Leading Operators” on a 
preceding page it appears that Standard of Indiana compares best with 
the others on earning basis, having been second among all operators in 
total net for at least three years while leading all the “Big Four” in point 
of net profits per share. In the matter of dividends this producer paid 
even more than Standard of N. J. on common in 1925, namely $22,500,000. 
The total of $33,000,000 in 1926 will be but $2,000,000 under S. O. of N. J.’s 
total at its current rate of dividend payments.* 


Outstanding Features of Indiana Standard. Maintaining a safe surplus 
($142,000,000, January 1, 1926), this company has never resorted to public 
financing. It has been generous in encouraging employe ownership of 
stock as well as in disbursing dividends. It is likely the largest income- 
taxpayer in the Middle West outside of Detroit, its $4,260,000 support of 
the Federal Government in 1925 comparing with $16,493,000 paid by the 
Ford Motor Co., $11,000,000 by the U. S. Steel Corp., and $5,600,000 by 
General Motors. Standard of Indiana’s growth has been extraordinary and 
its strength has been generally underestimated. It is now the foremost 
marketer not only in gasoline but also in fuel oil. It owns three-fourths of 
the 500 to 700 million bbls. reserves in the Salt Creek field (Wyo.) besides 
controlling probably more than 1,000 million bbls. unmined heavy petroleum 
in Mexico and Venezuela. The Burton rights might be conservatively capi- 
talized at $250,000,000, but the company does not publish a consolidated 
balance sheet showing the hidden strength in its semi-subsidiaries, not the 
least important of which is Lago Petroleum (through Pan American).+ 
Standard of Indiana “perfected a cracking process (the Burton) by means 
of which the supply of gasoline from a barrel of crude was greatly in- 
creased, gave it to the world on generous terms, and by this means acted as 
a potent force in keeping the price of gasoline down to a reasonable basis 
as well as in relieving the fear of a failure in adequate supply,” t 


GULF AND HUMBLE—GREAT CRUDE PRODUCERS 


A Quarter Century of Gulf Companies. Gulf production was originally 
formed as the J. M. Guffey Petroleum Co. in Texas, May 16, 1901, following 
the Lucas discovery (pp. 40-41). The name was changed in 1915. Gulf 
Refining was incorporated November 26, 1901, before building plants at 


* Wall Street Journal, August 16, 1926. Net income of $55,000,000 in 1926 nearly equaled 
that of the Standard of California. 

+ Referring to the control acquired of Pan Am. Petroleum & Transport Co., Wall Street 
Journal, December, 1925, quoted Chairman Robt. W. Stewart: “Through the acquisition of 
great producing properties and of remarkable facilities af transport, the last 12 months 
have seen us bulwark the foundation of our industrial home and raise its sunerstructure 
to such heights that the industrial edifice of no other oil company in all the world may 
look down upon it.’’ Re. “‘Iso-Vis,’’? new motor oil, see Wall Street Journal, October 30, 1926. 

ft Oil Trade, October, 1924, also quoting Colonel Stewart. 


OILDOM: ITS TREASURES AND TRAGEDIES 347 


Port Arthur, Fort Worth and (1926) Bayonne (N. J.). Gypsy Oil has 
grown up since 1907 in Oklahoma where it led all others by 2,000,000 bbls. 
in 1924. The parent corporation, Gulf Oil (of Pa.) was created in 1922 
with $120,000,000 authorized capital, succeeding its name-sake, Gulf Oil 
Corp. (of N. J., 1907) in control of the three named above and these sub- 
sidiaries: Gulf Pipe Line (1906), Gulf P. L. of Okla. (1909), G. Refining 
of La. (1905), Mexican G. Oil (1912), and Venezuela G. Oil (1923). Gulf 
Oil, through G. Refining and the lesser concerns, has enjoyed a career of 
continuous success under the 90-percent ownership by the Mellon family. 
Much of this is due to the ability of an engineer, President Geo. S. Davison * 
of the G. Refining. Unfettered by geographic limits, Gulf Oil has steadily 
fed crude to its hugh Gulf Coast refinery by going outside of its birthplace 
and into the Mid-Continent, California, Mexico and South America. (For 
view of its Port Arthur refinery see page 137.) 


Position in Production and Refining. While Humble has stood highest 
among crude producers in Arkansas, Louisiana and Texas,/ Gulf was first 
in total domestic production before the merger of Pacific Oil with Standard 
of Calif. Its 40 million bbls. in 1922 made 7.1 percent of the national total 
that year. At the middle of 1926, due in part to Spindle Top deep develop- 
ment, the Gulf Oil daily rate of foreign and domestic production combined 
did not lag far behind that of Standard of N. J. (200,009 bbls.) or the 
domestic rate of Standard of California (185,000 potential). In refining 
capacity it approaches The Texas (160,000 bbls. daily) with the 1926 com- 
pletion of its Bayonne plant (20,000), bringing the total to 145,000 bbls. 


- -_~ ~ 


—Courtesy Gulf Refining Co. 


* President also of the American Society of Civil Engineers during 1926. 

+ In these three states Gulf averaged 110,000 bbls. daily during week ended August 28, 
1926, breaking its own record for domestic production outside’ of Oklahoma.—Wall Street 
Journal, September 4, 1926. In combined U. S., Venez. and Mex. output Gulf passed the 
210,000 daily mark late in 1926, according to the Philadelphia manager, R. E. Garrett. 
Read “Gulf Oil Shows Marked Expansion,’’ Wall Street Journal, January 12, 1927. 


348 OILDOM: ITS TREASURES AND TRAGEDIES: 


Other independents comparing with it are Tide Water Associated (95,000 
complete, 30,000 topping) and the Union Oil of Calif. (37,500 complete, 
64,000 other). Gulf led in the Texas marketing of gasoline, summer of 
1926. It passed the 210,000 mark in daily crude at end of 1926. 


Financial Positions of Gulf and Humble. Both distinguished themselves 
in 1925, respectively among independents and Standards. In net available 
for dividends and surplus only one other independent surpassed Gulf with 
its $35,000,000. In net profit per share, Humble with $12.93 led all Stand- 
ards, even South Penn. ($11.87), Atlantic Refining ($11.53), Standard of 
Ky. ($10.62), and Vacuum Oil ($9.74). The profit percentage on par, 
Humble 52 and Gulf 31.8, was the highest respectively among Standards 
and the important independents. Humble ranked fifth in total assets and 
sixth in merchandise (inventories) as shown in a preceding table. Gulf 
outranked all in its class in total assets and was second in merchandise 
assets as seen from the following figures, as of January 1, 1926: 


All All 
Independents Mdse. Cash assets Independents Mdse. Cash assets 
Gulf OileCoroee. cca $67 $12 $428 Union Oil of Calif...... $383.5 $6.9 $244 
The Texas Company..... 94 18.8 398 Tide Water Assoc....... Sobel 19.1 236 
Sinclair Consol.......... 27.6 562 99352 Pure:Oikece soe 15.7 3cl- = 219 
Shells Union tiene. seve 22.6 5.8 > 332 Phillips Petroleum....... 10.3 Tee 130 
Empire Gas & Fuel..... 9.0 aes 297 Marland -Oil.)... eee 8.5 5.0 93 


(Note: The assets of the Associated and Tide Water Companies are here combined 
although the merger did not materialize before March, 1926. Pan American Petroleum & 
Transport Co. occupies an anamolous position, being independent in ownership but controlled 
in operation by Standard of Indiana. Its merchandise—stocks of crude and refined oils— 
on Januarp 1, 1926. were worth $13,000,000, cash on hand was $22,000,000 and total assets, 
$189,000,000. The figures in the table above represent millions of dollars.) 


—Courtesy Humble Oil & Refining Co. 


A MODERN GULF COAST REFINERY NEAR HOUSTON 


Baytown plant of the Humble Oil & Refining Co. Since it was built in 1921 it has 
been enlarged to a capacity of 50,000 bbls. daily—over half the total for the Houston dis- 
trict, second in Texas only to the Beaumont district. Humble earned almost $19,400,000 
net in 1926, compared with $22,620,000 in 1925. 


OILDOM: ITS TREASURES AND TRAGEDIES 349 


Humble Oil & Refining, capitalized at $43,750,000 in stocks and $25,000,000 
in bonds, besides a borrowing of $31,000,000 (from Standard of N. J., re- 
funded through sale in March, 1926, of 1,250,000 share of $25 par) at the 
beginning of 1926 had aggregate assets two-thirds greater than the total 
of the three liabilities just listed. Its inventories, chiefly in crude oil, 
exceeded by 10 percent its capital stock. It was thus similar to General 
Petroleum which early in 1925 had 15 million bbls. of crude and refined 
worth about $40,000,000, or much more than the par value of its common 
and preferred (totaling about $30,000,000). Humble’s production is the 
principal source of the 200,000 bbls. daily crude capacity credited to Stand- 
ard of N. J., which owns about 70 percent of Humble’s issued stock. The 
record for a single company’s 24-hour output from one pool or field was 
achieved by Humble at the middle of October, 1923, when in one day it 
obtained 104,370 bbls. at Powell, Tex.* 


UNION OIL COMPANY’S BIG 
OFFICE BUILDING IN 
LOS ANGELES 


More oil operators than min- 
ing companies own their homes. 
Substantial structures also in 

nt O xx. San Francisco, Houston, Tulsa, 

Her : Baltimore Philadelphia and 
2 New York have been erected 
during a decade out of surplus 
earned by oil companies. 

Union Oil officials in 1926: 
Pres., W. L. Stewart; vice pres., 
Eee We Clark (in? 1927 “press A. 
Paola) pmaWans Wie OVCUtL Ere bs 
St. Clair; comptrollers, R. D. 
Matthews, R. S. Mill, G. H. 
Forster ; secy., J. McPeak; asst. 
secy., W. R. Edwards; treas., 
R. J. Keown; asst. treas., J. M. 
Rust. 


—Union Oil Bulletin. 
SOME OTHER SUBSTANTIAL OIL COMPANIES 


Union Oil Co. of Calif. This is the strongest unappropriated independent 
on the Pacific Coast. In value of assets, as shown in table above, it ranks 
sixth among American independents. Despite the $3,000,000 net fire loss 
and excluding $22,500,000 appreciation due to new discoveries, particularly 
in Colorado, assets on March 31, 1926, totaled $265,400,000. Founded by 
Lyman Stewart, a native of Titusville, this company drilled its first well 
in 1888. Since then it has discovered 5 of the world’s greatest oil fields 
and has pioneered important steps in oil progress (page 96). It built the 

* The Oi Weekly, October 20, 1923. See also Wall Street Journal, March 5 and May 6, 
1925. For additional data on Gulf Oil see Barron’s, March 29, and Wall Street Journal, 


March 18 and 19, 1926. Gulf Oil had over 40,000 daily from the deepened Spindle Top, 
September, 1926. 


350 OILDOM: ITS TREASURES AND TRAGEDIES 


first refinery, laid the first pipe line to tidewater and ordered the first oil 
tanker built on the Pacific Coast. The company’s growth has been splendid, 
sales rising from $27,750,000 in 1916, to nearly $75,000,000 in 1925. The 
decade’s average net profit was over $9,400,000 per annum. Net for 1926 
is at the annual rate of $12,400,000. It therefore promises to exceed the 
1925 rate of 11 percent on par or $2.78 per share (see earlier page under 
“Income and Profits of Leading Operators’). Union Oil is in first-class 
financial shape with working capital of about $50,000,000, quick assets 
being fully 7 times current liabilities (see table, end of chapter).* 


SIR HENRY W. R. DETERDING 


Chairman of the board, Shell-Union Oil 
Corp., and managing director, Royal Dutch 
Petroleum Co., Ltd. (of The Hague, Hol- 
land). 

Sir Deterding is one of the most distin- 
guished men in international oildom. In 
the management of the American subsidiary 
of the Royal Dutch-Shell he is associated 
with Gen. Avery D. Andrews Sir Robert 
Waley-Cohen, and Samuel M. Vauclain, the 
great American builder and marketer of 
(Baldwin) locomotives. 

In an address at New York, August, 
1926, Sir D. advised against the refinery 
practice of widening the naphtha fraction 
at the expense of kerosene for which profit- 
able sales are growing. 

Net income of the Royal Dutch and 
“Shell”? companies in 1925 exceeded $60,- 
ae 400,000, or $7,500,000 more than that of 
a the Standard of Ind., second American oil 
company.—The Oil Trade, now Fuel Oil. 


Shell Union Oil Corp. was created in February, 1922, as a consolidation 
of all the producing and refining properties in the United States (except the 
New Orleans Rfg. Co.) owned by the Royal Dutch-Shell; also certain in- 
terests not controlled by that combine. Of the original 8,000,000 non par 
common stock, 72 percent went to the Royal D-S and 28 percent to the 
Union Oil Co. of Del., which held 26 percent interest in the Union Oil of 
Calif. In 1923 the common was increased to 10,000,000 shares, all issued. 
Of the 200,000 preferred 6 percent stock of $100 par value, about 87 percent 
was outstanding May 24, 1926. Total market value of both was then $268,- 
400,000, or $77,000,000 more than the bonds and stocks of Union Oil Co. of 
Calif.+ The recent rise in the price of its shares reflects the fact that its 


* See Barron’s, June 21, 1926, and Wall Street Journal, July 10. The 1926 ‘Petroleum 
Register’? (published by H. S. Reavis, 40 Rector St., New York), contains the following 
on page 159: ‘‘Unfon Oil is known on three continents. It has devoted 40 years to develop- 
ing Union Non-Detonating Gasoline and Aristo Motor Oil. * * * Union Oil backs its 
gasoline and oil with one of the most complete organizations in America today. It has 700 
producing wells, 75,000 bbls. of crude a day, 6 huge refineries (see under “Gulf and Humble’”’ 
on a preceding page), 13 deep sea tankers, 900 miles of pipe line, 500 service stations and 
300 distributing plants (p. 92). See also index under Union Oil, Lyman Stewart and 
W. W. Orcutt; also E. W. Clark, president of the A. P. I. in 1927. 

+ Shell Union common was worth $25 on May 24, 1926, and three months later reached a 
new high of $2914, making the total market value of its securities over $313,000,000 about 
August 22, 1926. 


OILDOM: ITS TREASURES AND TRAGEDIES 351 


net profit of $17,240,000 for the first half of 1926 came within $3,175,000 
of its total for the entire year 1925. In value of assets this Dutch-English 
concern ranks fourth according to a preceding table. These are mainly the 
properties of its two principal subsidiaries, Roxana Petroleum in the Mid- 
Continent, and Shell Co. of Calif. on the Pacific Coast. Through these and 
aside from its half interest in Comar Oil Co. (discoverer of the Tonkawa 
pool) it has increased its daily crude production from 35,000 bbls. in early 
1922 to an average of 116,000 bbls. in 1925 or 45 percent of the entire 
Royal Dutch-Shell group’s world output. In the same time refinery capacity 
was expanded to 105,000 bbls.* Two of the most profitable investments of 
Shell Union have been the half-interest in Comar (which has been a leader 
in Oklahoma since its discovery of Tonkawa) and the 26.77 percent interest 
in Union Oil of Calif. which it sold in 19238 at a profit of $6,000,000. The 
splendid profits of 1926 may be attributed to the company’s marketing 
ability although crude yield has been almost stationary (totaling about 135 
million bbls., 1923-1926). Its fine financial position at the end of 1925 was 
revealed by a net working capital of over $54,000,000, its current assets 
being 6.3 times current liabilities of $10,300,000. The chairman of Shell 
Union is Sir Henri W. A. Deterding and the president is J. C. Van Eck. 
Among the directors are Richard Airey and Samuel Vauclain. 


Pan American Petroleum & Transport Co., producing principally through 
Mexican Petroleum Co., Ltd., of Del., obtained 4 million bbls. more crude 
in 1925 than Shell Union. This large holding company was controlled by 
E. L. Doheny and associates up to March, 1925, when Standard of Indiana 
procured working control, as stated elsewhere. In light crude alone it had 
a potential of 150,000 bbls. daily in October, 1926. Its reserves are 
enormous. Of its $27,335,000 net profit in 1925, about 73 percent was 
earned by Mexican Petroleum, Ltd. The latter increased its production to 
37,370,000 bbls. or 8,122,000 more than in 1924. Other reasons for the 
financial improvement of this huge producer of fuel oil were more stable 
prices and expanded market aided by association with Standard of Ind. 
Its tanker fleet of 2,250,000 bbls. capacity is second only to that of Stand- 
ard of N. J. Aside from “Mex. Pete” (chief Latin Am. producer) Pan 
American operates in Arkansas markets through subsidiaries in southern 
states and in South America, and owns 60 percent in American Oil Co. 
(retailing along the Atlantic), and 51 percent of the common stock in Lago 
Oil & Transport Co. (producing Venezuelan oil for the New Orleans or 
Destrehan refinery). 


Pan-American Western Petroleum Co. (inc. Del., 1924) on May 1, 1925, 
obtained the California properties of Pan-American Petroleum & Trans- 
port Co. for $23,000,000, half cash and half 15-year 6 percent notes. 
Assets included 26,750 acres in fee or leaseholds, production exceeding 11,000 
bbls. daily, a 65,000-bbl. refinery, storage for nearly 9 million bbls., a 


* Since the end of 1925 the refining capacity must have materially improved. Shell Co., 
of Calif., alone was reported to have 110,000 bbls. capacity in the fall of 1926, ranking next 
to Standard Oil of Calif. with 225,000 bbls., and ahead of these other California refiners: 
Union Oil, 101,400; Associated Oil, 81,500; General Petroleum (Stand. of N. Y.), 75,500; 
Pan American Western, 65,000; California Petroleum, 35,700; Richfield Oil, 31,500. 

See Barron’s, September 6: Wall Street Journal, July 31 and August 14, Oil & Gas 
Journal, August 5, 1926. On Royal Dutch-Shell, which through Shell Union has 13 percent 
of U. S. crude output, see Oil & Gas Journal, July 22, or Wall Street Journal, July 31, 1926. 


352 OILDOM: ITS TREASURES AND TRAGEDIES 


modern marine loading station with loading capacity of 10,000 bbls. gaso- 
line or 20,000 bbls. fuel oil per hour, 147 miles of pipe lines and extensive 
distributing and marketing facilities. In 1925 the company produced 6 
million bbls. and bought 15.5 millions, largely from Petroleum Securities 
Co., a personal company of E. L. Doheny. Considered together, the two 
companies at the middle of 1926 were producing at a daily rate of 32,000 
bbls., exceeded by only six other California: operators. Although one of 
the youngest oil companies, Pan-American Western was recently nineteenth 
in inventories and twenty-ninth in the market value of its bonds and stocks. 
-Net income in 1925 was more than $4,230,000 compared with gross of nearly 
$28,600,000. Net per share was almost double as much in 1925 as in 1924.* 


PART OF MARLAND RE- 
FINERY AT PONCHA 
CITY, OKLAHOMA 


Showing six Dubbs 
Crack Units with _ en- 
larged reaction chambers 
but without the usual 
high towers. Marland’s as- 
sets gained $10,000,000 in 
1926 with no _ Federal 
taxes account of $36,000,- 
000 deduction from income 
and surplus. 


Marland Oil Makes Marvelous Record. This company was formed in 
1920 as a consolidation of Kay County Gas Co. and its subsidiary (M. Oil 
Co. of Mex.), with M. Refining Co., in 1920. It now owns entirely also 
the M. Oil Companies of Calif., Colo., Okla. and Tex., as well as the M. Pipe 
Line Co. and Kansas Osage Gas Co. It controls Reagan County Purchas- 
ing, Inc., and has (indirectly) a half interest in Comar Oil (see under 
“Shell Union’). From 3,750 bbls. net in 1920, daily production has grown 
to fully 50,000 bbls. (in September, 1926), including some from Mexico. 
Average in 1925 was 33,000 bbls. Handling altogether 100,000 bbls. daily, 
Marland has become one of the biggest buyers of Mid-Continent crude. 
Further gains are forthcoming through its participation in new Texas fields 
and its own discovery of Seal Beach pool at Long Beach (Calif.). It plans 
to drill 50 tests in the Hudson Bay Co.’s holdings, prairie provinces, Canada. 
It is financially strong, with current assets almost 6 times liabilities and 
total assets approaching $100,000,000. Rank, 1925, was fifth in net profits 
among independents. Poor showings in 1923 and 1924 were due to heavy 
depletion deductions, debt payments, etc.} 


Pure Oil Prominent in Surplus. Originally incorporated in Ohio as the 
Columbus Production Co., the Pure Oil Co. was only 12 years old on April 
8, 1926. It already ranks eighth among independents in total assets. In 
surplus of assets over liabilities—about $60,000,000 early in 1926— it is 
surprisingly strong standing next to The Texas and Gulf companies. 
Strangely, its daily crude yield of 50,000 bbls. exceeded its refining 
capacity (by 6,000), but that was due to buying Wortham production of 


* Re-bond issue of $15,000,000. See “‘A Thriving Unit,” in Barron’s, September 6, 1926. 
Officers: President, E. L. Doheny; vice president, E. L. D., Jr.; secretary, R. M. Sands; 
treasurer, Fred. Ritter. 

+ See Barron’s, February 22, March 8, and June 14, 1926; Oil & Gas Journal, July 15 and 
-August 12, 1926; Wall Street Journal, February 10, September 3 and 4. 


OILDOM: ITS TREASURES AND TRAGEDIES 353 


Humphrey’s-Boyd Oil Co. in 1925 following heavier purchases (1924) of 
Humphreys leases in Powell, Mexia and Currie pools and the Humphrey’s 
Pure Oil trunk pipe line 208 miles long. That condition is being remedied 
by the enlarging (and modernizing) of its Marcus Hook (Phila., Pa.) plant 
which is but one of its nine refineries located in five states including Minne- 
sota. It owns about 2,700 tank cars and nearly 90 distributing plants 
besides more than 250 marketing stations in the North Atlantic states, 
Ohio, West Va., Ind., Wis., Minn., N. Dak., Idaho, Mont., Wash., and Sask. 
(Can.). It has its own office building and refinery in Germany through 
Julius Schindler G. m. b. H. at Hamburg; also its eight-story home office 
building at Columbus. Its net profits of nearly $13,000,000 in 1925 (fiscal 
year ended March 31, 1926), gave it sixth rank or next to Marland among 
independents (see under “Income and Net Profits of Leading Operators’). 
This sum was 22 percent more than the 1924-25 net and 22 times what it 
was in 1915. During. these 11 years its capital stock investment increased 
7-fold.* Headquarters were moved to Chicago in 1926. 


THE SUN OIL CO.’S MODERN REFINERY AT MARCUS HOOK, NEAR PHILADELPHIA 


* Pure Oil is more or less of a family affair like Gulf Oil, Pan-American Western, and 
Sun Oil. B. G. Dawes is chairman; H. M. Dawes, president; R. W. MclIlvain, W. E. Hutton, 
C. B. Watson, N. H. Weber, H. N. Cole, C. C. Burr, vice presidents; F. S. Heat, secy.- 
treas. See Oil & Gas Journal, p. 4, October 22, 1920, July 15, 1926; also Petroleum Age, 
December 15, 1924, p 22, and Wall Street Journal May &. 1926. Late in 1926 it was a leader 
in the sensational Seminole pool which early in 1927 surpassed Cushing. 


D) 
354 OILDOM: ITS TREASURES AND TRAGEDIES 


Phillips Petroleam—Phenomenal Growth. The world’s leading producer 
of natural gasoline (500,000 gals. daily in August, 1926), was only 9 years 
old in June, 1926. Total assets grew from $26,000,000 in 1919 to $125,000,000 
on December 31, 1925. Net earnings increased from $1,620,000 in 1920, to 
$12,330,000 (next to that of Pure Oil) in 1925. During the first half of 
1926 net was at an annual rate 35 percent greater than in 1925. Its net 
daily production of crude reached a new peak of over 61,000 bbls. in August, 
1926, 25,000 of it coming from the Burbank field; also additional from the 
Panhandle and Wilbarger County, Tex. It is sixth among independents 
in output of petroleum. Daily rate was 75,000 bbls. at end of 1926.7 


—Courtesy Atlantic Refining Co. 


TYPICAL SCENE IN ONE OF THE PRINCIPAL U. S. OIL PORTS 


Crude petroleum leads raw sugar and all other commodities received at the ‘“‘Quaker - 
City.”’ Refined mineral oil ranks among the first three outgoing articles of commerce, the 
others being grain and coal. In 1925 oil receipts were over 46 million barrels, 90 percent 
of which came from the Gulf coast and California. Water shipments, mainly refined oil, 
aggregated 11 million barrels, 60 percent to foreign countries and by far the major amount 
by the Atlantic Refiining from the Point Breeze plant on the Schuylkill, shown above in 
part. Gulf Refining is now erecting a modern refinery in this vicinity. 


REFINERS AND MARKETERS IN THE PHILADELPHIA DISTRICT 


Terminal of Four Pipe Lines. Pure Oil, Crescent (now abandoned), 
Transit and United State pipe lines have had their terminals at Philadelphia. 
At present more crude is received by water than otherwise. On the Atlantic 
Coast the Quaker City has become the foremost refining and marketing 
center next to Greater New York. Excluding plants on the Jersey side of 
the Delaware, Philadelphia refineries handle about two-thirds of the oil 
refined in the state.* The independents are more numerous here than in 


{ Frank Phillips is president; L. E. Phillips and C. Alexander, vice presidents: H. E. 
Koopman, secy.-treas. Among the directors are E, E. DuPont and Wm. N. Davis, who is 
chairman of the Public Relations Committee of the Am. Pet. Inst. 

* Capacities of plants in and around Philadelphia are as follows (in, thousands of bbls.) : 
Atlantic, 50; Sun Oil, 20; Vacuum, 11; Sinclair, 12; Pure, 5; The Texas, 5; Crew-Levick 
(on Petty Island), 4. The 2d, 4th, 5th and 6th of these are located at Marcus Hook. 


OILDOM: ITS TREASURES AND TRAGEDIES 355 


Greater New York. The two Standards are the Atlantic Refining and the 
Vacuum Oil Co., the former having its home office here in a huge and 
handsome building. The latter has one of its two minor refineries and its 
second shipping plant across the river, at Paulsboro; its main plant being 
at Bayonne, on N. Y. Bay, and its oldest plant at Olean, N. Y. 

Atlantic Refining Financially Strong. The most distinctive “Keystone” 
operator of any size, the Atlantic Refining Co., was incorporated in Pennsyl- 
vania in 1870. It took over all Standard Oil business in this state at the 
time of the dissolution. It owns about all of Atlantic Oil Shipping Co., A. 
Oil Producing Co., A. R. Co. of Africa, A. Refining Co. of Brazil, A. R. Co. 
of Italy, and A. Refining & Asphalt Corp., besides Red “C” Oil Co. and 
Richmond Oil Co. -Through the second of these it owns much of Atlantic 
Lobos and Panuco-Boston, both operating in Mexico, also Gulf Coast Oil 
Corp. of Texas. Through heavy stock ownership in Superior Oil Corp. it 
has options on that company’s Kentucky output. A one-half working 
interest is held in Andes Petroleum’s large Colombian and Venezuelan hold- 
ings. About 20,000 bbls. daily during 1925 was derived mainly from the 
Mid-Continent and Kentucky. Exclusive of Superior output the daily yield 
of owned and controlled oil was 22,500 bbls., September, 1926. Refining 
capacity totals 66,000 bbls. daily from plants at Philadelphia, Franklin, 
Pittsburgh and Brunswick, Ga. That near the confluence of the Schuylkill 
and the Delaware (Pt. Breeze), is one of the largest and most modern in the 
country, covering 676 acres. Marine equipment includes 14 tankers. Dis- 
tributing stations approximate 350 and service stations 220 in Pa., Mass., 
Conn., R. I. and Del. Gross operating income in 1925 was $137,850,000 
and in 1926 may exceed $160,000,000. The 1925 net of $7,167,000 was the 
highest since 1920. In the first half of 1926, owing to the higher costs of 
crude, etc., the spread, between cost and return per bbl. of crude processed 
was reduced to 6.30 cents from 6.63 cents in the first half of 1925. Present 
low dividend rate reflects a conservative financial policy since the com- 
pany is lowering its funded debt at the rate of $4,300,000 yearly* Surplus, 
however, stood at $27,634,000 on December 31, 1925, and may pass the 
$30,000,000 mark by 1927 if meantime no stock dividends be declared. The 
most favorable feature, perhaps, is the unusually high ratio of quick assets 
to current liabilities, nearly 10 to 1, which is surpassed by only a few com- 
panies such as Salt Creek Producers, Ohio Oil and Vacuum Oil. 

Sun Oil, Another Substantial Company. This is one of the most complete, 
conservative, and steadily successful of all American operators. Though 
not among the ‘‘Big Ten” in the oil business, it ranked seventeenth among 
the independents in the market value of issued securities ($43,300,000), May 
24, 1926. Through Sun Shipbuilding and Dry Dock Co., at Chester, Pa., it 
turns out its own tankers and other vessels. Its first predecessor was 
founded in 1886 by Joseph N. Pew, whose association with oil began in 1864. 


* The strong financial position of Atlantic Refining is largely due to President J. W. 
VanDyke, one of the most experienced oil men. Vice presidents include W. M. Irish, 
W. P. Cutler, R. D. Leonard and W. D. Anderson; Albert Hill is treasurer, E. R. Cox, 
and Robt. H. Colley, asst. treasurers; W. M. O’Conner, secy., and E. J. Henry, asst. secy. 
See comparison of Standards in table under “‘A New World Power in Petroleum.”’ 

The present is the highest surplus since previous to the payment of the $45,000,000 stock 
dividend in 1922. Although Atlantic Rfg. ranked but 19th in value of its securities, May 
24, 1926, and 18th in total assets December 31, 1925, it stood 16th in surplus, 10th in current 
assets, and 9th in oil inventories. 


356 OILDOM: ITS TREASURES AND TRAGEDIES 


The present parent company was incorporated in New Jersey in 1901. The 
president is J. Howard Pew, and among the vice presidents are J. N. Pew, 
Jr., and J. Edgar Pew (who was honored as the second president of the 
Am. Pet. Inst.). Production of 5,000,000 bbls. of oil in 1925 came from 
Texas, Oklahoma, Arkansas, Louisiana and Ohio. Daily capacity of three 
refineries is 25,000 bbls. Sun lubricants are popular in Latin America, 
Europe and Africa as well as in all domestic states. Sales have risen 
from $8,200,000 in 1914, to $48,000,000 in 1925. Net earnings averaged over 
$3,350,000 annually the past 11 years. Undistributed surplus of only 
$3,550,000 on December 31, 1925, evidenced a liberal dividend policy. 


Crew-Levick Business Begun in 1862. Acquired by Cities Service Co. in 
1916, this company and the Empire Gas & Fuel Co. are the two chief 
petroleum subsidiaries of the Doherty interests. Nearly 800 small wells in 
Ohio and Pennsylvania are owned by the Crew-Levick Co., also 3 refineries 
totaling about 7,000 bbls. daily capacity and located at Titusville, Warren 
and Petty Island (near Phila.). It pioneered the present retail system. It 
supplies over 200 communities in Md., Pa., N. J., N. Y., Conn., and Mass. 
Its assets approxmated $13,000,000 May 31, 1925. 


FINANCING THE AMERICAN OIL INDUSTRY 


Expansion in Petroleum. An overshadowing movement of 20th century 
has been the growth of the oil business. According to Edward Prizer the 
entire petroleum industry employed but $114,000,000 capital in 1882.* By 
1922 this sum had expanded to nearly $8,000,000,000 and by the end of 1925 
to $10,000,000,000. The value of the crude oil increased from less than 5 
million dollars in 1860 to 25 million in 1880, 76 million in 1900, 128 million 
in 1910, and 1,360 million in 1920. The value of the products advanced as 
follows: 27 million dollars in 1869, 85 million in 1889, 124 million in 1899, 
237 million in 1909, and 1,633 in 1919. It probably approximated 3,000 
million dollars in 1925 (wholesale, at refineries). 


Sudden Need for New Capital. If the investment increase has been 
evenly distributed during the 40 years, 1882-1922, the annual rate would 
have been almost $200,000,000 or 70 percent more capital each year than 
was tied up in the entire petroleum business at the end of the first 23 years 
of its operation. However, according to Mr. Prizer, this demand for new 
capital was not gradual but grew suddenly since 1918-1914. At the close 
of 1925 there were about 16 times as many autos and trucks registered in 
the United States as on December 31, 1913. Within a dozen years the oil 
industry has had to meet a 16-fold gain in demand for motor fuel addi- 
tional to increases in other directions. There is another side to the situa- 
tion: Enormously greater working capital has been required for the drilling 
of much deeper wells, the paying of higher bonuses, rentals and wages, 
and the transportation of petroleum and its products over greater distances. 


Current Requirements. The 1925 president of the A. P. I. estimated the 


* Based on Census data; see ‘‘We Shall Find the Oil We Need’ (through investing capi- 
tal), by the president of the Vacuum Oil Co. in Nation’s Business, July, 1923; also, 
“Financing the Oil Industry,’ J. J. McGraw, president, Exchange Nat’! Bank, Tulsa, in The 
Tulsa Spirit, October, 1925. 

+ J. Edgar Pew, pres., Sun-Beacon Oil Co., succeeded in 1926 by W. S. Farish. 


OILDOM: ITS TREASURES AND TRAGEDIES 357 


EDWARD PRIZER 


Chairman of the Board, Vacuum Oil Co. 

Born at Doylestown, Pa., Mar. 3, 1856, 
according to ‘‘Who’s Who in America,” he 
began as reporter on a country newspaper 
before becoming its business manager. His 
literary ability has not been lost, as evidenced 
by his contributions to such particular periodi- 
cals as Nation’s Business. He ventured into 
oil with the Vacuum Oil Co. at the age of 26. 
He was promoted to president in 1917, and 
since 1924 has served as chairman. During 
the world conflict he worked on the Petroleum 
War Service Committee, and afterwards was 
elected vice president of the American Petro- 
leum Institute. Like other Standard men, Mr. 
Prizer is public spirited. Thus he takes time 
to act as trustee of the Orange (N. J.) 
Memorial Hospital. 


—The Oil Weekly. 


cost of drilling 24,642 new wells in 1922 at almost $530,000,000. Because 
of the increasing depths this capitalized cost must have been about $700,- 
000,000 in 1925. Add thereto $550,000,000 as the capital expenditures refin- 
ing, storage, transportation and marketing facilities brings the total for 
1925 to $1,250,000,000. This is too high considering the huge outlay for 
cracking units added to established plants, for entirely new refineries, and 
for innumerable filling stations (some superfluous). 

Capital Invested—Comparisons. The total invested in oil and represented 
by property values early in 1926, approximated $10,500,000,000 * or little 
more than one-fifth of the 1925 depreciated value of the United States farms 
and farm buildings. It was 8 percent less than the assessed value of New 
York City in 1924, and about 5 percent more than all our investments 
abroad or our combined Federal, state and local taxes in 1925. The sum 
invested in the United States oil industry exceeded the total stock of money, 
including gold and bullion, in the United States on April 1, 1926, by over 
$2,000,000,000; or by $1,500,000,000 our foreign trade in 1925, or the ready 
cash of all American insurance companies. Investments in the production 
branch alone (about $4,750,000,000) approximated twice the assets of the 
U. S. Steel Corporation or twice the present annual rate of capital expendi- 
tures by the American railways. 

How the Industry Has Been Financed. To quote Banker McGraw, this 
great industry has financed itself. As late as 1915, oil financing was consid- 


* Assets aggregated $7,411,000,000 in 1920, according to Victor Ross in his “Evolution of 
the Oil Industry.’”’ Of this 48 percent pertained to production and only 11 percent to 
refining. The author has added $1,250,000,000 to the 1924 figure of Chas. E. Bowles in 
The Oil & Gas Journal, September 25, 1924. In that for March 20, 1924, N. O. Fanning 
summarizes the capital investments during the 5-yr. period, 1919-1923; averaging at $600,- 
000,000 yearly of which’ $225,000,000 represents outlay for refineries. Crude and refined 
inventories of 71 operators on December 31, 1925, totaled $1,311,000,000 or 46 percent more 
than the estimate by Bowles in 1924. For details see “Forms in Which Assets Are Found,’’ 


358 OILDOM: ITS TREASURES AND TRAGEDIES 


ered by the conservative bankers as too risky to offer their customers. It 
was risky not only because of the inherent chances of the business itself, but 
because some men, of not too exact ideas of business honesty, sought to 
make quick fortunes out of .the desire for speculation (see Chap. XIV). 
But the real producer, the real refiner and the real marketer built up their 
business out of their profits. Instead of distributing accumulated earnings, 
these went back into oil properties, extensions of refineries, pipe lines and 
tank cars, until by sheer force of will and untiring labor the oil business 
was built solidly upon itself. (1) By so conserving and using their profits, 
the older companies have been able to expand their business without asking 
the public to buy their bonds or stocks. * * *. (2) Newer companies 
have asked and obtained capital from the public. .-N. O. Fanning * estimated 
that out of $1,920,000,000 expended during the’5 years to December 31, 1923, 
for oil facilities other than production, about $1,000,000,000 or a little more 
than half was paid out of earnings. During the 14 years since the disso- 
lution decree of 1911, Standard Oil of N. J. invested more than $766,000,000 
in property, but only 26 percent thereof came from the sale of securities 
($200,000,000 of 7 percent preferred stock said to be soon converted into 
common). 

Surplus Serves a Threefold Function. As already shown, some concerns, 
such as the Atlantic Refining and Gulf Oil, set aside more of the current 
earnings than they distribute in dividends. Such accumulated surplus may 
be regarded as a reserve for three purposes: (1) To absorb losses; (2) to 
meet dividend payments in lean years; (3) to supply new capital for ex- 
pansion.X Thus, in 1925, N. J. Standard paid 7 percent on preferred out of 
$114,000,000 total net earnings and divided the balance between dividends 
on common (1/5) and surplus (2/5). Its accumulated surplus increased 
almost $80,000,000 to about $350,000,000 on December 31, 1925. Before that, 
$566,000,000 had been plowed back into property out of surplus. No wonder 
‘that in 1922 there was declared a stock dividend of almost $398,000,000 (400 
percent of the then $99,500,000 common stock capital) by the greatest of all 
cil companies.f 

Increase in Capital of Old and New Companies. Pogue presents a table 
showing the enforced expansion of established operators and the enormous 
growth of new concerns. The capital stock of 250 of the former increased 


* Page 157, The Oil & Gas Journal, March 20, 1924, and ‘‘Financial Problems Successfully 


Met,’ May 29; also Barron’s, May, 1926. See Pogue’s ‘‘Economics of Petroleum,” pp. 9-10. 
+ See Barron’s, May 3 and 17, 1926; also The Wall Street Journal, September 1, 1925, 


“Standard Oil Now Building Surplus.”’ Surplus earned in 1925 approximated that of the 
Ford Motor Co. ‘“‘Those who envy or decry the profits of business evidenced by surplus 
do not understand where their own interest lies. The benefits of improved methods and 
machinery and labor-saving devices, as soon as their use becomes general, accrue far more 
to the consumers than to the producers. Competition always reduces prices after costs 
are generally reduced. * * * Stability as well as economy and progress is largely 
dependent upon the judicious building up of surpluses. * * * Profitable business is 
the only foundation for material prosperity. Undercapitalized business means that im- 
provements requiring several years to pay for can not be made. This brings high prices 
for consumers and losses to owners.’’—Editor Lefevre, Texaco Star, March, 1926. Cases 
in point of self-financing: (1) The Texas Co.’s purchase of the Southwestern Petroleum 
Co. with over $11,000,000 cash and short-term notes, spring of 1926; (2) Standard of Calif. 
in 1920 spent over $35,000,000 for additions to refineries and marine equipment and for 
acquisition of producing properties in N. and S. America; (8) Magnolia (Standard of 
N. Y.), was spending $30,000,000 in 1926 for betterments and bigger facilities, chiefly in 


Texas. X 4, ty agin trovidr. 


OILDOM: ITS TREASURES AND TRAGEDIES 359 


from 885 million dollars in 1913, to 3,174 million in 1920. That of new oil 
companies (i. e., those not existing in 1914) grew from 81 million dollars 
in 1915 to 8,351 million in 1920. But because 5 to 6 billion represented 
“paper” or “boom” capital and only 5 to 6 billions of capital represented 
tangibles or real assets, the actual capital absorbed into the oil business to 
support its legitimate expansion during the period 1913-1920 was between 
4 and 5 billion dollars. Contemporaneously, the funds flowing out of the 
industry as dividends was around 1 billion, leaving from 3 to 4 billion 
dollars as an approximation of the net amount absorbed.* During 1924, in- 
vestments in new oil companies alone amounted to $787,000,000 compared 
with $926,400,000 in 1923:** 


MAKING MONEY OUT OF MINERAL OIL 


Many Ways of Making Money. Under “Earnings of the Entire Indus- 
try,’’ near the middle of this chapter, 13 sources of corporation income were 
enumerated. But the individual investor finds few desirable opportunities 
devoid of high hazard unless he advises with a genuine geologist or an ex- 
perienced engineer. The two safest ways of making money are through fee 
ownership of oil land + and the holding of stock in firmly established. com- 
panies of the vertical monopoly type. If private land is not for sale in a 
new oil field perhaps the investor may be able to buy part of the mineral 
rights of a fraction of the royalty; but he must allow for oildom’s law of 
diminishing returns or he may lose out, particularly if he buys before por- 
duction becomes settled.t The author knows a Texas rancher (p. 123) who 
not only receives bonuses and royalties as a land owner and income as a 
stockholder in his operating company, but also makes money out of royalty 
interests acquired from other lessors. From his own experience he learned 
not to appraise royalty interests on flush production (see ““Making Money 
Out of Crude Stocks”’). 


Wildcatting Attractive Though Highly Hazardous. About 85 percent of 
_the wildcat “wells” drilled in the United States are failures. According to 
the discoverer § of the Wewoka pool (fifth largest in Oklahoma, June, 1926), 


* Page 8, “‘Economics of Petroleum,” John Wiley & Sons, 1921; see also Bowles’ ‘The 
Oil Business and the Oil Game,’ The Oil & Gas Journal, May 22, 1924, in which he states 
that “More money was contributed by the public in 6 years to create 5 percent of the oil 
industry than basic companies raised in 50 years.’’ , 

** According to Petroleum World, Los Angeles, quoted in Ohio Gas & Oil Men’s Journal, 
April, 1925. As indicating how assets are overtaking capitalization, Magnolia Petroleum 
Co. lately increased its capital stock from $100,000,000 to $180,000,000 in order to cover 
its increase in assets. Its properties in Ark., Kans., N. Mex., Okla., and Tex., were valued 
at $230,000,000, according to The Wall Street Journal, January 4, 1926. 

+ “Undoubtedly the man who chances to own land on which oil in paying quantity is 
found is blessed with good fortune, especially under modern conditions whereby fair and 
generous treatment is assured him. But he contributes nothing to the expensive processes 
by which the precious liquid is extracted from Mother-Earth, and risks no capital in the 
experiment.”’—The Lamp, October, 1920, quoting Victor Ross under ‘“‘America’s Investment 
in Petroleum.”’ 

tSee page 71. It is the preferred policy of some concerns to own. oil land outright 
instead of paving bonuses and royalties. Probably &5 to 90 percent of current output 
comes from. leaseholds and not feeholds. 

§ R. H. Smith, pres., The Oklahoma Co., who addressed the Federal Oil Conservation 
Board, February, 1926. He said that if the Government should discourage legitimate wild- 
catting the price of oil would pass beyond all reasonable bounds. 


360 OILDOM: ITS TREASURES AND TRAGEDIES 


—The Lamp. 


INTERNATIONAL CHARACTER OF ANDIAN NATIONAL CORPORATION 


Three of the directors, left to right—-Maurice Boyer, sub-director, Bank of Paris and 
Netherlands; C. E. Neil, general manager, Royal Bank of Canada; Hon. Hugo Baring, 
Baring Bros., London. The Andian Pipe Line, about 360 miles: long, was built at the 
record rate of 30 miles per month through the jungle of Colombia at great cost. The 
capital of $15,000,000 was raised in Canada, Colombia, Europe and the United States, one 
of the directors being President Donnell, of the Ohio Oil Co. 


it took 4,000 wildcat tests drilled during 25 years to find the 200 pools in 
Oklahoma. “Barrels of money and plenty of nerve” + are required in the 
search for oil. Large oil companies will not always reserve for small con- 
cerns and innocent and ignorant investors the risks of making dry holes. 
Thus a 5,130-foot venture of the Standard Oil Co. of California on Wheeler 
Ridge (page 64) cost $175,000 before abandoned for a better location. 
Another dry hole, over 6,000 feet deep, cost the same operator almost $50 
per foot. While fully 90 percent of new oil companies are formed for the 
purpose of wildcatting, it generally takes more capital than most of them 
command because of the increasing depths. In fact, this speculative line 
is no longer regarded as a poor man’s game (see under “The Legitimate 
Wildcatter,” Chap. XII, and “How to Win in Wildcatting,” Chap. XIV).t 
Profitable Production of Natural Gasoline. In the production of crude © 
oil much money ‘is lost by most small operators, especially in the Appa- 
lachian field (see “Margin Between Cost and Market Value,” in first half 
of this chapter). But in recent years a new opportunity has arisen for 
making money by the minor producer through the less hazardous conser- 
vation of gaseous gasoline. In 1911, when casinghead or natural-gas gaso- 
line made up % of 1 percent of the motor fuel obtained in the United 


* Financing pipe lines and profiting from their operation will be treated in the next 
annual edition under ‘‘Transportation.”’ 

+ The Oil and Gas Journal, September, 1923; idem, August 13, 1926, J. O. Lewis, pet. 
engr., ‘‘Advocates Regulation of Wildeatting.”’ 

t “To the average man the oil business means the seeking and finding of oil wells. 
Spectacular incidents surrounding the discovery of new fields * * * are nourishment 
to the newspapers which print pages about the millions made over night. Well they may, 
for in no other industry in the work-a-day world is there such enormous reward for a 
successful undertaking. * * * Great as are the fortunes made by finding oil where not 
suspected, they are insignificant beside the fortunes made in other branches of the busi- 
ness.”’-—S. O. Andros, pres., Petroleum Extension University, Fort Wayne, Ind. See Oil and 
Gas Journal, May 6, 1926, p. 102, “‘One of the Few Remaining Poor Man’s Fields’’; idem, 
May 22, 1924, ‘‘The Oil Business and the Oil Game,’”’ by Chas. E. Bowles. Those intending 
to drill for oil without previous experience should read Press Notice No. 14,117, ‘‘Hints on 
Oil Prospecting,’ U. S. G. S.; “‘Business of Oil Production,’’ John Wiley & Sons, $4.50; 
E. R. Lilley’s “The Oil Industry,’”’ D. VanNostrand, 8 Warren St., New York, 1926, $6.00. 
The last is highly recommended. 


OILDOM: ITS TREASURES AND TRAGEDIES 361 


States, only $2,000,000 was invested in this business. In 1925 the capital 
amounted to practically $200,000,000 and the output measured about 30,000,- 
000 bbls. or 11 percent of the total production of gasoline. According to 
C. O. Wilson the production of natural gasoline has become a major in- 
dustry. In fact, one of the most prosperous and fast growing of the leading 
operators (Phillips Petroleum) bases its success on this branch in which 
it is foremost with one-eighth of the total yield in 1925. Investors, how- 
ever, are advised against being stampeded into buying stock promiscuously 
since failures are not infrequent in this youngest branch of the oil business.* 


INVESTING IN OIL SECURITIES 


Few Bonds and Fewer Borrowings. Possibly fewer than 50 American 
oil companies have ever issued bonds and probably even fewer borrow money 
without security. Until rather recently banks looked askance at 99 percent 
of the oil companies, particularly those confined to the production of crude, 
let alone the finding of petroleum. Now that the business has become safer 
through the wider application of geological science and engineering prin- 
ciples and more economical and settled through the reduction of waste, 
increased recovery and corporate mergings, interest rates have been materi- 
ally reduced. Thus in 1921, the Vacuum Oil Co. issued $20,000,000 worth 
of bonds bearing 7 percent interest and Skelly Oil Co. $3,500,000 bearing 
7% percent, whereas the same concerns in 1926 could borrow at 5 to 6 
percent. That better relations with bankers have been brought about, partly 
through the stronger cash position of many companies, is evidenced by the 
increasing number of oil men who have been made bank directors in late 
years. Thus in 1925 the present chairman of The Texas Co. was elected 
to the board of the Chase National, one of the three largest banks in the 
United States. 

Bond Liabilities in Force, Middle of 1925. Some of the more important 
bond issues are listed below. It will be noted that the seven leaders in 
funded indebtedness were Sinclair Consolidated (total 87.3 million), Gulf 
Oil (45), General Petroleum (27.3), Atlantic Refining (27.1), Union Oil 
(25.2), Humble O. & R. (25) and Associated (24). It may be safely 
assumed that the aggregate petroleum capital represented by bonded liabili- 
ties is below $500,000,000. This sum is small considering that the total 
new bond financing in 1925 amounted to almost 10 times as much. In 
October, 1926, California Petroleum offered $12,000,000 worth of 5% per- 


* Oil and Gas Journal, October 8, 1925, estimated total gross revenue in 1925 at .$125,- 
000,000. Within 18 months California invested over $31,000,000 in new equipment. See 
“Portable Plants,’’ idem, November 19, 1925; also Oil Trade, April, 1924, H. J. Struth’s 
“Past, Present and Future of Nat. Gasoline Industry.” 

“That the casinghead gasoline business is not so attractive as one would imagine is 
proved by the many dismantled plants and bankrupt gasoline companies in the Mid-Con- 
tinent. There is considerable advantage in owning oil leases and producing therefrom 
both crude oil and casinghead gas, using the latter in the manufacture of gasoline in one’s 
own plants. Also, if refineries producing blending material and possessing adequate dis- 
tributing and marketing facilities are owned and controlled by oil companies, the conditions 
are conducive to a substantial margin of profit.””—Mining and Metallurgy, July, 1923. 

The author advises investors against encouraging the opening of new filling stations 
where absolutely not needed. Interlopers in this line are not only opposing the conser- 
vation of capital but they are actually increasing the prices of petroleum products which 
the public must eventually pay. Those who feel justified in entering this branch, especially 
in out-of-the-way places, will benefit from reading “‘How to Run a Service Station at a 
Profit,’’ a valuable handbook for sale at $3 by Oil Trade, 350 Madison Ave., New York. 


362 OILDOM: ITS TREASURES AND TRAGEDIES 


cent debenture bonds and in November Standard of N. J. $120,000,000 of 
5 percent debentures. 


Name of Amount Interest Matur- Name of Amount Interest Matur- 

corporation millions rate ing year corporation millions rate ing year 
Associated Oil...... $24 6 1935 Phillips “Petrol... $3.2 71% 1931 
Atlantice Riser 12.1 41%, 1926-28 Producers & Rfrs... 3.4 8 1931 
Atlanticg Riera. ces 15 5 1937 Sinclair, Ser. A..... 47.9 Ht 1937 
Barnsdall Corp...... Sue 8 19381 Sinclair, Ser. B..... 24.4 614 1938 
Galena “Signal. ..20. 5. 7.6 6&7 1930, 338 Sinclair, (sers.G3. 5. 15 6 1927 
General Petroleum... 18 5 1940 Skelly WOU oo oe 2.8 7% 1931 
General Petroleum... OF3 6 ts Standard, Cahfiic ai. 20 5 1926-33 
California Petroleum ofa 6% 1933 Standards4N. eee 20 61% 1933 
Gulf Oil Corp...... 38 5 1937 Standards WN. tyre 15 Aly ? 
Gulf Oil Corp. Ser... 12 514 1926-28 Sun ViOmeCor re Saas. 10 5% 1939? 
HoustonssOilimiees. 7 61% 1934 Tide Water Oil..... 12 6% 1931 
Humble O. & R..... 25 5% 1932 Transcontinental ... 6 7&8 1931, ’29 
Magnolia Petrol..... 15 AY, ? Union Oil,. Calif.... 16.2 5 1927-35 
Mid-Continent ...... 12 61% 1942 Union Oil, Calif.... 8.9 6 7 
Pan 2Amec hs Gee as ela Oreced ? Valvolinemi.cis caine 1.9 7 1937 
Pan Am. Western... 2 6 1940 White Eagle O. & R. 2.6 51% % 


Significance and Safety Feature. Any bond fit for the average investor 
is a mortgage upon property. All the assets of an oil company, as a rule, are 
worth much more than the total face value of its bonds. Those of the 
Associated, December 31, 1925, were 5 times the bonded obligation; Atlantic 
Refining, 5.6 times; Humble Oil & Rfg., 6.7; Gulf Oil, 9.9; Phillips Petro- 
leum, 40; Sinclair Consol., 3.9; Standard of Calif., 18.7; Standard of N. Y., 
15.2; Tide Water, 8.2; Union Oil, 10. The Texas Co. and most of the 
Standards have no bonded debt. Standard of Ind. owns half of the Sinclair 
Crude Oil Purchasing Co., which in January, 1925, issued $50,000,000 of 
3-year 6 percent bonds; also half of the Sinclair Pipe Line Co., which has 
$20,000,000 of 20-year 5 percent gold bonds outstanding. To offset the 
greater safety of bonds compared with stocks the investor must understand 
that stockholders have voting power and bondholders none. If the stock- 
holders, indirectly, mismanage an enterprise and lose money, the safety of 
the bonds depends upon what is left; hence the advantage of a high ratio 
between assets and bond liabilities.* 


Principles in Buying Bonds and Stocks. Obviously, an oil company’s 
mortgage bonds are safer than its debenture bonds and preferred stock, 
and the last is in turn not so risky as its common which, however, is not 
limited in earning power to any indicated rate of interest (see table of net 
profits). Although the rate is fixed for bonds and preferred stocks, their 
yield depends upon the price paid for them, whether above or below par. 
Thus, if a $100 bond bearing 6 percent interest were bought at 90 percent of 
par it would yield 6 x 100 ~ 90, or 6 2/3 percent on the investment. Nine 
rigorous tests in buying an industrial bond are listed by Barron’s: (1) It 
must be secured by a mortgage (leaves out debentures, however good); 
(2) earnings must equal at least twice the fixed charges; (3) trend of earn- 
ings during a 5-year period must be upwards; (4) bond must mature within 
25 years; (5) stockholders must consider their equity at minimum within 
5 years at not less than the funded debt; (6) if a closed mortgage is not 
behind the bond, additional bonds should not be issued for more than 50 
percent of the net cost of additions and improvements; (7) net quick assets 
should at least equal the funded debt; (8) as to size, company should have 


— 


* See “‘Safety in Industrial Bonds,”’ Barron’s for May 24, 1926 ; “Elements of Bond Invest- 
ment,’ by. A. M. Sakolski, The Ronald Press, New York; “Jordan on Investments” (p. 105), 
Prentice-Hall, Inc., New. York. 


OILDOM: ITS TREASURES AND TRAGEDIES 363 


outstanding securities of fully $10,000,000; (9) some of these should be listed 
on the N. Y. stock exchange. 


Investing Versus Speculating. Most investors regard the earning power 
more vital than the safety features and so prefer to buy common stock. 
They are willing to run a larger risk for more liberal return. Net on par 
may vary from 5 to 8 percent on preferred and generally from 6 to even 
50 percent on common (see Humble, 1925). Common is attractive not only 
because of current profit realized through dividends but also because of 
possible increment in market value of this stock due to additions to assets. 
A man invests if he looks primarily to the preservation or safety of what 
he already has; he speculates if he aims at profits or yield, risking what he 
has to that end. To be classed as an investment, according to the Better 
Business Bureau,* any security should possess three cardinal qualities: (A) 
Safety of principal; (B) satisfactory income and (C) saleability. After test- 
ing for these traits the buyer of bonds or stocks should consider their 
suitability for his particular purpose. 

Quality Testing Before Investing. Legitimate and honestly managed 
though an oil enterprise may be, it must be considered more or less specu- 
lative unless its bonds and stocks stand the tests for the qualities mentioned. 
Under (A) the first to consider is (1) “Security in securities—the preserva- 
tion of capital already owned; next, (2) capitalization should bear a con- 
servative relation to assets and past earnings should have paid fixed charges 
(working costs, debt interest, etc.) with easy margins; (3) men in the 
management both of the oil company and the house selling the securities 
should have a reputation for ability and integrity. Under (B) the buyer 
should have in mind (1) the regularity or permanency of the dividend pay- 
ments or the interest income; (2) the rate of return on the market price 
he is paying; (3) the distinction between bonds and stocks in that a cor- 
poration is definitely and legally obliged to pay interest periodically on 
the former (excepting income bonds but including corporate notes classed 
with bonds), but may withhold dividend payments whenever warranted by 
good policy; (4) a safe surplus of earnings above interest and dividend 
demands in normal years so as to provide funds for future years that may 
be lean. Under (C), saleability, one should realize (1) the advantage of 
converting an investment into cash when needed; (2) what a fair price is 
so as not to accept bids 5 or 10 points below the reasonable price just because 
there may be an immediate buyer; (3) what an open market is, in which 
the public actively buys and sells securities.+ 


SHARES OF ESTABLISHED OIL COMPANIES 


Sixteen Best Sellers in 1925. The following table represents a rearrange- 
ment of statistics published in The Wall Street Journal with the addition 


— 


* “How to Invest Your Money,” issued by the B. B. B., 280 Broadway, New York (D. F. 
Houston, chairman; Bayard Dominick, pres.). Obtainable from H. L. Doherty & Co., 801 
Union Nat’l Bank, Pittsburgh, or from locals of the B. B. B., as at 808 Public Ledger 
Bldg., Philadelphia. This organization is affiliated with the Assoc. Advertising Clubs of 
the World (page 106, f. n.), with which the author conferred before withdrawing in 1923 
from the U. S. Treasury Department so as to prepare this oil book. Read “Investment 
versus Speculation,” The Texaco Star, May, 1922. 

+ As to suitability, there are 12 tests which will be described in detail in the author’s 
forthcoming book ‘‘Oil Finance and Investments.” 


364 OILDOM: ITS TREASURES AND TRAGEDIES 


of columns for par value and approximate dividend yield based on the last - 
1925 market quotation. 


TRANSACTIONS IN PETROLEUM STOCKS, NEW YORK, 1925 


Thousand ; 

shares Description of Par Range of prices Dividends 
sold securities value High Low Last Amount Yield % 
6.93% Pan’ American Po & 1. B. 2... 8 $50 $841 $6014 $77 % $6 8 
5 oa meMarlandieOilo ee cipace were tote ees no 601% 325% 5914 4 6.7 
SOO Pera CH Cie Ol niir cee atac eve stan tenn no 18% 515% 15% 3 4 
3,791 Independent Oil & Gas........ no 41% 13% 32% 5 15 
3;760-. Phillips-Petroleumi suse cee no ATR 8644 46144 3 6.5 
3,110 General Petroleum ........... 25 5914 42 58% 3 bul 
3,082 Standard Oil of N. J. (com)... 25 AT, 3836 46 aE 2.2, 
3,018: ‘California. Petroleum ....e se. 25 3436 23% 34 2 6 
299k The Lexas ,, COMpPAnye a2. 5 snes: 25 55 42% 5436 3 5.5 
2,312 Sinclair Consolidated ......... no 2478 whee 237% aps Xe 
PSRie Skelly (Oise Recieve ton ts anaes 25 321% 21% 3214 2 6 
1,750 Mid Continent Petrol......... no 38 253, 37 es ats 
1,669 Texas Pacific Coal & Oil....... 10 23% 10% 17% reel bie 
1,524 Simms Petroleum 4. .......... 10 28% 17% 28 1 3.6 
1345 Barnsdale cA 6 aie irete ote, states 25 33 18% 33 2 6 
1321 Pure Oil. «(common ) s,s. 25 33% 251% 30% 4 13 


Ratio of Dividend to Par Value of Stock. Many oil shares were originally 
purchased at or below par so that, to older stockholders, it may be of inter- 
est to learn the percentage which dividends of 1925 made of par value. 
Naturally, newer investors are concerned with the current market price of 
shares; so, for the independents, the percent yield on the last quotation in 
1925 is shown in first column below. There is not much trading in Standard 
Oils so that the same information is not given in regard to these. 


DIVIDENDS PAID DURING 1925 AND INCOME RATE BASED ON PAR VALUE 


% Yield 
on mkt. Independent Par Divi- Div. Standard Par’ Divi- Div. 
price securities val. dends rate % securities val. dends rate % 
13 Pur jou (eom ise $25 $4 16 Standard, Neb.:..... $100 $20 20 
g RPanvAm: “Avc& Be 50 6 12 Vacuum: Oil... ce. 25 5 20 
& Mexican Petrol........ 100 12 12 Standard, Ky........ 25 4 16 
555 the + Texas Cows.) 25 3 2 Chesebr. Mfg......... 25 3144 12.5 
5.1 General Petrol...... ae 25 3 12 Cumberland Pipe..... 100 12 LZ 
36 Simms Petroleum...... 10 1 10 Illinois Pipe.....:... 100 12 12 
4.3 Associated Oil......... 25 2 8 Prairie Pipe......... 100 8 8 
6:6. Barnsdallie4 Bea. carssee 25 2, 8 Natl: Transit.” 222 1214 1% #10 
6 Calif. Petroleum....... 25 2 8 Standard, Ind........ 25 2% 10 
7.6: Pure* Oil, (pfds) sa... 100 8 8 Standard, Ohio....... 100 1 10 
8.7 Sinclair Cons. (pfd.). 100 8 8 Galena-Signal (pfd.). 100 8 8 
6 Skelly Ole 3 eee 25 2 8 Standard} N-) Yin. 25 1.4 5.6 
4.38 Union : Oil: Caltesees 25 1.8 7.2 Standard, Ohio (pfd.) 100 q T 
6 Atlantic R. (pfd.).... 100 “i ve Union Tank (pfd.)... 100 ¥ T 
5.8 Shell Union (pfd.).... 100 6 6 Humble O. & R...... 25 1.2 4.8 
5 Tide Water (pfd.).... 100 5 5 Standard, N. J. (com.) 25 1 4 


Ratio of Current Assets to Current Liabilities. Based on company re- 
ports as of December 31, 1925, the following ratios have been calculated. 
As annual reports are not yet standardized it is not always easy to segre- 
gate the quick assets and current liabilities.* The results are fairly reliable 
as a guide to those who regard this ratio as a safety factor of great con- 
sequence. It is a poor management that will permit current assets to become 
less than twice the liquid liabilities. The former are made up of crude 
and refined stocks, cash, accounts and notes receivable, saleable supplies and 
such other liquid assets as Liberty bonds. 


— 


* For this reason the author’s results differ radically from those in the table published by 
Ward, Gruver & Co., 20 Broad St., New York, for the below-named oil companies: Ohio 
Oil, 13.38 and 25.7; Phillips Petrol., 20 and 4.6; Humble, 5.5 and 1.4; Standard of Ind., 5.2 
and 3.6; Standard of Calif., 7.1 and 3.2. 


OILDOM: ITS TREASURES AND TRAGEDIES 365 


Company Ratio Company Ratio Company Ratio 
Salt Cr. Producers.... 31 Prairie Oil & Gas..... 6.4 Pure vOil wesc css te 4.3 
Mountain Producers... 13 General Asphalt....... 6.4 Calif? PetroliianG..cs « 4.0 
Veet) Ollmmraons atts 11 Shell? Unions avis sree # Simms Petrols.<.....- 3.4 
Atlantic Refining..... 95 Marland Oil.....).... Spee 5.5 Sun cOilNiasy acters as see one S55 
South Penn Oil....... %.8 Continental mist es oa. a: 5.9 Paciiig@Oieaaiscwacuees 3.0 
The Texas Company.. endl. Standard, aN.e ey * wea 5.3 Pan Am. Western..... 2.8 
Union Oil of Calif.... 6.8 Gl ie Oile Male o-catelae sanek 5.2 Sinclair Consol........ 2.8 
Mid Continent......... 6.5 Tide Water Assoc..... 4.8 Skelly sO ew eruecaat cetene 2.8 


Listed Securities. There are several stock markets on which bonds and 
stocks of oil companies are listed. The two leading ones are the N. Y. Stock 
Exchange and the N. Y. Curb. An October, 1926, brokers‘ compilation shows 
that 110 miilion shares of common and preferred shares of oil companies 
listed on the former were worth over $4,000,000,000. In addition, 18 leading 
oil issues listed or traded in on the N. Y. Curb Market with 70 million 
shares outstanding had a market value of nearly $3,000,000,000.* 


RETROSPECT OF RECENT YEARS BEFORE 1926 


The Period of Depression, 1922-1924. This succeeded the Readjustment 
Period, 1919-1921, which centered on the year of highest prices and pros- 
perity in American oildom. That period averaged 100 million barrels 
more in yearly yield of crude than the War Period of 1916-1918. Such 
an increase seemed extraordinary but it was completely eclipsed by the 
immense 240-million advance of the period 1922-1924. The financial re- 
covery of late 1921 was upset in the summer of 1922 as overproduction 
gained headway and handed out 85 million barrels more crude than in 1921. 
This gain was as great as the total output 20 years before. A further 
favor to the buyers in 1922 was the receipt of 127 million barrels Mexican 
oil or more than the domestic yield in 1905. Crude stocks climbed 230 
percent, from 122 million at the opening of 1919, to 400 million barrels at 
the end of 1924. 


The Depression Period centered on 1928 in which 8 pools attained a 
daily mark of 100,000 bbls. or more (pages 104 and 148), and production 
passed both the 600 and the 700 million mark, topping the 1922 total by 
175 million bbls. California alone accounted for 70 percent of this great 
gain. Cheap crude (page 168) began to move from the Pacific to the 
Atlantic seaboard late in 1922, and still continues (12,666,000 bbls. in 1926 
additional to 20,687,000 bbls. refined oil). Such tanker transport cost so 
much less than piping from the Mid-Continent that the producing industry 
became demoralized. Whole fields were closed in: (as in the Valley of 
California) and Mid-Continent output was curtailed (pages 72-5, 78-81, 
and 325-6). The market price fell below the cost of production. The crude 
business lost $180,000,000 gross or $142,000,000 net in 1923. With improve- 
ments begun late in 1923 the deficit in this branch decreased to $115,- 
600,000 gross or $24,000,000 net in 1924, according to the Bureau of 
Internal Revenue. Output in 1924 was 2 percent less than in 1923, mark- 
ing the first fall in crude production since 1906. It was one of the few 
years in which the last month produced less than the first. The rate of 


* Prince and Whitely, New York, N. Y., quoted in The Wall Street Journal, October 
29, 1926. 

{ For details about the post-war period 1919-1921, see G. B. Richardson’s review in 
“Mineral Resources of the U. S.’’; also ‘‘The Derrick’s Handbook of Petroleum,” Derrick 
Pub. Co., Oil City, Pa. An early review of 1923 appears on page 104. 


366 OILDOM: ITS TREASURES AND TRAGEDIES 


output was unusually steady, the best week departing from the poorest 
by only 8.3 percent compared with 32 in 1923, about 23 in 1925, and 27 
in 1926. Price cuts occurred, nevertheless. One authority ¢ claimed that 
the average price of crude oil fell from $1.49 per barrel in 1923 to $1.46 
in 1924. The oil trade was. altogether near a balance in 1924. (For re- 
view of 1925 see page 304 and footnote here). 


REVIEW OF 1926 AND OUTLOOK FOR 1927 


Changes in Output of Oil. As a result of drilling 29,310 wells (65 per- 
cent proving oil producers) daily production rose steadily during 1926 from 
1,900,000 bbls. to 2,400,000 bbls., a 27 percent gain. The total of 775,000,000 
bbls..was only 1.2 percent above that of 1925. The new peaks were due 
to developments in Seminole County, Okla., the Texas Panhandle and 
Spindle Top. The 25-million advance of Texas was eight times the gain 
in either Kansas, Louisiana, Montana or Oklahoma. It almost offset the 
losses in Arkansas (18 mil.), California (6 mil.), and Wyoming (4 mil.). 
Minor gains were registered in Colorado (1.6 mil. or 140 percent), Penn- 
sylvania (1 mil.), New Mexico, New York, West Virginia, Ohio and 
Michigan. Flooding in the Appalachian field and gast lift in California 
and the Mid-Continent contributed a little to the 1926 total.* 


Supply Versus Demand. Domestic output added to imports of 60 million 
gave a new supply of 835 million bbls. plus crude stocks of 418 million on 
January 1, 1926. Domestic demand approximated 780 million, exports 15.4 
million, and stocks on December 31, 400 million bbls. The difference 
covers the direct consumption as crude outside of refineries and various 
losses through leakage, evaporation and fire. The demand for gasoline 
gained 17.2 percent over 1925, but the demand and production of the other 


major refinery products was about stationary. In the table herewith for 
the year ended December 31, 1926, the figures stand for million barrels 
and “New Supply” covers output plus imports. 


{ The Lamp, Feb., 1925. U.S. Geol. Survey figures (page 317) show a betterment, from 
$1.34 to $1.43 at the well. Not a single new pool attained a peak of 100,000 bbls or more 
daily during 1924. Long Beach led again, but Salt Creek declined 70,000 to 50,000 daily at 
the end of 1924. 

_t Prosperity Revived in 1925. New peaks were reached in daily and total output, respec- 
tively, 2,347,000 bbls. (average, week of May 30) and 764,000,000 bbls. The Wortham pool 
(p. 165) attained 167,000 bbls. daily about the middle of January; Smackover, 431,000 bbls. 
late in May; Inglewood, 113,000 Aug. 1; Garber (p. 142), 73,000 Nov. 22. Imports declined 
20 percent to 62,000,000 bbls., hardly‘ half of the 1922 receipts. Crude exports of 13,400,000 
bbls. were less than in 1924 and not quite as large as Atlantic seaboard receipts of Cali- 
fornia crude. Refinery runs climbed over 20 percent. Stocks grew to 418,000,000 bbls. 
crude and 120,000,000 bbis. refined. Despite the deluge at Smackover, prices rose early in 
1925 and stayed fairly firm in the Mid-Continent until reduced on Aug. 27. The average 
approximated $1.68, or 25 cents a bbl. more than in 1924 (U. S. G. S.). On that basis the 
1925 output at wells was worth fully $1,280,000,000, a value exceeded only in 1920 and 1926. 
Gasoline prices were higher than in 1924. Exports of all mineral oils totaled $473,000,000, 
or almost $70,000,000 more than the average for the five years 1921-1925. Earnings so 
improved that some producers paid dividends again and oil securities were in greater 
demand. The period of 1925-1926 was noted for a series of sensible mergers consummated 
in behalf of practical conservation. 

* Pools of Fourteen Million or More. Both Hutchinson County (Tex. Pan:) and Seminole 
passed Smackover in daily rate before the end of 1926. But Smackover, with 52 mil. bbls. 
for the year, retained its leadership on the larger basis. Long Beach was second (88 mil.) 
and Midway-Sunset third (34 mil.). Others in order were Hutchinson Co. (23 mil.), 
Huntington Beach (19), Santa Fe Springs (17.4), Inglewood (17.4), Burbank (16.4), 
Spindle Top (14.8), Ventura Ave. (14.8), and Tonkawa (13.9) (See Oil & Gas Jnl., Feb. 
10, 1927, p. 96). The deep sands at Spindle Top produced alone in the second half of 1926 
more than the year’s increase for the entire country. One tract of 1% acres there had 
yielded over 2,100,000 bbls. per acre up to April, 1927, the highest for the United States. 


OILDOM: ITS TREASURES AND TRAGEDIES 367 


Total New Stocks, 

Products Dom. demand Exports demand supply 12-31 
Gasmang siiel (Ollie, irsc.skie o che cele 340 38.4 374 379.6 25 
GasOlimer pete are wisi tis ieee sues fale eas as 262.2 43.5 205.7 305.8 39 

PICT OSETIG Mit ee ee veel oes as, elas 38.3 21.6 59.6 61.8 8.6 

MAL OTICAIITS Mises crete) coe Ria epenane.c lores 22.6 9.4 32.0 32.3 7.6 


Strategy of Storage. According to W. C. Teagle, oil stocks are now 
excessive not only because of the capital (over $1,200,000,000, pages 303 
and 323), tied up but also because each barrel of crude is the equivalent 
of almost 2 barrels in ante-cracking days when none of the gas and fuel 
fractions were converted into gasoline. ‘‘Under such conditions neither 
advance nor maintenance of posted prices for crude is justified in the in- 
terest of the industry or even the producer.” Storage of huge supphes 
(p. 81) would otherwise serve as a much stronger factor in the stabiliza- 
- tion of prices for finished products.t 

Steadiness of Prices. Prices did not vary so much as in the three pre- 
ceding years. Steady increase in consumption, slightly reducing total 
stocks to about 500 million barrels, permitted prices to be well maintained, 
even strengthened up to November for some of the lighter crudes. Fair 
prices for gasoline and other products, shaded a little late in 1926, aver- 
aged 1 cent higher than in 1925 when the average tank-wagon price in 50 
cities was 17% cents. This allowed prosperity to prevail throughout the 
industry during 1926. One result was the wiping out of deficits for many 
small producers. Others procured earnings for dividends and surplus even 
better than in 1925, as indicated in the table below.* 

Cities Service oil subsidiaries, chiefly Empire Gas & Fuel Co., earned 
around $7,500,000 net in 1925 and $9,000,000 in 1926. 

A uniform gain of only 12 percent for the 65 oil companies which in 
1925 earned $650,000,000 net would make their total $728,000,000 in 1926. 


NET PROFITS OF OIL AND OTHER LEADING OPERATORS, IN MILLION DOLLARS 


1925-1926 

Independents 1925 1926 Standards 1925 1926 Miscellaneous 1925 1926 
The Texas Co.... 39.6 36.0 Standard, N. J.. 111.2 117.7 Gen. Motors.... 116.0 186.0 
Gulf Oil Corp.77535.0)- 35,1 Gov Califinn.< 43.6 55.1 U. S. Stl. Corp. 118.0 143.0 
Shell-Union ..... 20-Aw 3125 dovgeindsncnes 55.9 55.1 Am. Tel. & Tel. 107.0 117.0 
Phillips Petrolenae loom 214 COs sINGN eas Om. O2.5 Pennsy- Ry...:.. 62.0 67.6 
Sinclair Consol... 6.0 17.0 Pan Am. P.&T. 27.38 31.3 N. Y. Cent. Ry. 48.0 55.7 
Pure Oil......... 12.9 16.0 acVuum Oil.... 24.2 25.0  Dupont........ 24.0 41.9 
Tide Water Assn. 16.5 18.4 HumblevOnG@ Ree 22.60) 9 1954 Boece Ole R vice se 1 Omer vZOs0 
Union Oil....... 10.5 - 11.8 Prairie O.&G.. 14.2 16.0 Am. Smelt. & 15.2 17.8 
Marland One. Lies elie Ohio: Oils. eee 9.4 13.5 Chrysler Corp.. 17.1 15.4 
Mid-Continent 07.0 8.6 Standard, Ky... 17.2 7.3 St. Joseph Lead. 8.2 9.4 
ter Petroleum. 6.3 6.6 Atlantic Rfg.... 7.2 7.2 Unit. GasImpr. 8.1 9.3 

merada Corp... 2.5 5.0 Standard, Neb.. 7.2 5.9 Baldwin Loco... 0.2 5.9 


+ The output of gasoline gained 40 mil. bbls. (p. 304), or 15.5 percent. Its recovery from 
crude increased from 35.1 percent to 38.5 percent (16.1 gals. from 1 bbl.) in 1926. Nearly 
94 mil. bbls. came from cracking. Stocks of this motor fuel on Mar. 31, 1926—46.1 mil. 
bbls. (of 42 gals.)—were the highest in history until 12 months later when 52.4 mil. bbls. 

£See Wall St. Jnl., Mar. 15, 1927, and Oil & Gas Jnl., Mar. 17, pv. 29. On stabilization 
Pogue noted three ways in which the industry progressed in 1926: (1) Better control of 
crude production (except during the last quarter) ; (2) increasing encroachment of gasoline 
demand upon the fuel oil supply for cracking; (3) lowering cost and indirectly swelling 
eh ah Asad advance in technical efficiency in both field and refinery.—Oil Trade, 

eb., & 

* The petroleum business (in the fall of 1926) was in better shape than it had been for 
five years. When the large buying companies are forced to build storage for crude from 
flush fields, the producer must realize that the cost thereof is taken from the price paid. 
a hd * It is production in flush fields that wields the greatest influence on the crude 
price structure.—Oi & Gas Jnl. See also Wall St. Jnl., Nov. 9, 1926. Commenting on the 
gasoline situation, the Harvard Committee on Economic Research was quoted in the Phila. 
News Bureau Nov. 29: The N. Y. tank-wagon price remained unchanged since June at 
21 cents. This is contrary to the experience of the four years preceding, in each of which 
gasoline prices declined in the spring and summer (p. 113). The failure to drop was 
ascribed to two facts: (1) Mid-Continent crude prices remained firm until recently, and 
(2) gasoline stocks were low again. (The table above was compiled by John D. Wright.) 


368 OILDOM: ITS TREASURES AND TRAGEDIES 


U. S. Petroleum Trade. Crude imports declined slightly to 60.4 million 
bbls. worth $80,000,000 in 1926. Exports in millions were as follows: 
Crude, 15.4; gasoline, 43.4; gas and fuel oil, 38.4; kerosene, 22.1; lubricants, 
9.4; also 167,000 tons of wax. The value of all mineral oils exported ex- 
ceeded $550,000,000, a new record, two-thirds of the value of the raw cot- 
ton exported.f 


Domestic Doings, 1926. The first year of the Twentieth Century’s second 
quarter proved eventful: (1) The nation hit new highs in production and 
so did 5 states west of the Mississippi (Texas, Oklahoma, Montana, Colo- 
rado and New Mexico); (2) Spindle Top proved the most spectacular pool, 
its comeback being staged after the mid-year and its sudden production 
per acre being unequaled; (3) the Texas Panhandle passed the 165,000- 
bbl. mark from less than 25,000 bbls. daily in May; (4) the Seminole field 
contributed heavily during the second half of 1926; (5) the Bradford- 
Allegany field (Pa.-N.Y.), brought its output up to 6.2 million bbls. for 
the year, remained first east of the Mississippi and became 31st in the 
United States after experimenting with soda solution in its water drive 
(pages 72 and 145); (6) an unusual run of tank-farm fires occurred in 
California during April with loss of $12,000,000 besides tanker explosions 
elsewhere involving loss of life; (7) a storage record for gasoline of 46.1 
million bbls. reached on March 31; (8) new peaks in production, domestic 
demand and exportation of gasoline; (9) largest financial rearrangement 
in American Oildom through retirement of $230,000,000 worth of 7 percent 
preferred stock in Standard Oil of N. J. in favor of its first bond issue 
($120,000,000 5 percent) and additional common (3,449,317 shares of $25) ; 
(10) organizing the new Texas Corp. of Del., with $250,000,000 capital; 
(11) Vacuum Oil, oldest active operator, celebrated 60th anniversary; (12) 
second bond issue, Standard of N. Y., $50,000,000 (25-yr. 4% percent de- - 
bentures); (18) largest fuel oil contract for 14 million bbls. Sunburst oil, 
by Great Northern Ry.; (14) cash dividends of over $200,000,000 by the old 
Standard Oil group; (15) growth in furnace oil demand despite 31 percent 
rise in refinery prices; (16) Federal Oil Board’s first report, September; 
(17) $500,000 fund for research under supervision of the A. P. I. aided 
by the National Research Council.* 


Noteworthy World Events. Major happenings in the Eastern Hemisphere 
included (1) Rumania’s rise of 40 percent in output of crude; (2) the 
beginning of natural gasoline recovery in Russia; (3) the coal strike 
stimulant to demand for oil in England; (4) the Soviet’s efforts to sell 
oil from nationalized wells of foreign owners; (5) preparation of the 
Batavian Petroleum Co. (Royal Dutch-Shell{ subsidiary controlling East 


+ British Petroleum Trade in 1926. Crude imports increased from 3 mil. bbls. in 1921 
to 16.3 mil. in 1925 and fell to about 15 mil. in 1926. Gasoline receipts grew to the new 
peak of nearly 16 mil. bbls., gas and fuel oil to 14.7 mil., and kerosene to 5.7 million. The 
reduced crude receipts reflected the industrial depression in the Kingdom. Gasoline con- 
sumption expanded to about 650 mil. Imperial or 780 mil. American gallons in harmony 
with the increase in motor vehicles. Hardly one-fifth of this came from British refineries. 
The United States, as usual, supplied more than half of the mineral oils other than crude. 
Persia was the principal source of the latter, 77 percent in 1926, 67 percent in 1925, 
according to U. S. Trade Commissioner H. S. Fox, London, in Commerce Reports, Mar. 7, ’27. 

* For other events of 1926 consult annual review numbers of periodicals, such as The Oil 
& Gas Jnl. (Feb. 10 issue of which contains 8 pages of necrologies), Oil Trade of March, 
and Oil Weekly. On ‘‘Mexican Petroleum Industry in 1926,” by Vice Consul S. G. Beck, see 
Commerce Reports, Apr. 18, 1927. 

~ Combined capital of Royal Dutch and ‘Shell’ Transport & Trading Co., Ltd., was in 
1925 about $255,000,000; net income, $60,422,802, of which $24,441,600 came as dividends 
from the Batavian Petroleum Co. See also Shell-Union, index and preceding page. 


OILDOM: ITS TREASURES AND TRAGEDIES 369 


India’s production) to increase capitalization to nearly $175,000,000 by the 
issuance of 25-yr. 4% percent debentures on January 11927) thy the 
Western Hemisphere (6) Colombian crude began moving to Bayonne, N. J., 
after completion of Andian pipe line (pp. 217-218, 360); (7) Venezuela 
developed a monthly output of over 3 million bbls. and displaced Persia 
in 4th rank; (8) Secretary Kellogg denied the right of the Calle’s regime 
to take land titles away from American oil operators in Mexico; (9) a 
Washington jury acquitted E. L. Doheny of wrongdoing after testimony 
that the Navy had asked him to build storage in Hawaii; (10) the world’s 
deepest test for oil, near Fullerton, Calif., reached 8,046 feet in September 
(p. 810); (11) the world’s largest single refinery, the Gulf Refining Co.’s, 
at Port Arthur, Tex. (p. 187), increased capacity to 125,000 bbls., and 
(12) hydrogenation under high pressure can convert 50 to 60 percent of 
coal into oil according to Dr. F. Bergius before an international congress 
held at Pittsburgh (see editorial, N. Y. Times, March 20, 1927). 


Outlook for Oil in 1927. The new peak of practically 2,500,000 bbls. 
daily (almost one-third of British India’s yearly yield) reached for the last 
week of February proved how futile forecasts are in the oil industry. 
However, indications are for continued high output well into the summer 
in view of Seminole’s persistence and the resumption of activities in West 
Texas and elsewhere with the coming of spring. The outlook is therefore 
not so good in the first half of 1927. The several price cuts in crude and 
refined oils, begun last November, will result in reduced earnings. Because 
of the cost of storing oil above ground recourse must be had to bank bor- 
rowing or public financing (Barron’s, March 21.) <A. S. Farish no doubt 
referred to restrictions in wildcatting and curtailment in production 
through cooperative agreements encouraged already by the Federal Oil 
Board when he declared that upon the producers themselves, in great 
measure, depends the welfare of the petroleum industry during 1927 (Wall 
St. Jnl., February 17.) However, conditions during the first quarter of 
1927 appear to favor the transportation department of the industry, par- 
ticularly pipe-line and tank-car companies in which the public owns shares 
(Wall St. Jni., April 13, 1927).* 


* Chairman Jones, of the N. J. Standard, estimated the 1927 output of crude in the U. 8S. 
at 800 million barrels. Pres. Reeser, of Barnsdall Corp., was quoted by Barron’s, Jan. 27, 
in an optimistic way: Demand for all petroleum products in 1927 will exceed last year’s 
requirements by 8 percent. There will be a 14.5 percent increase in gasoline consumption 
to a total of 14,300,000,000 gals. (340,000,000 bbls.) in 1927, according to the Oil & Gas Jnl., 
Dec. 30, 1926. R. J. Pilcher, before the Los Angeles section of the A. I. M. E. last Decem- 
ber, denoted the California situation as unfavorable with over 50,000 bbls. of shut-in 
production at that time and with an expected daily rate of 632,000 bbls. in July, 1927. 
Unsettled conditions in the oil business may be expected to continue until the appearance 
of a leader like E. H. Gary in the steel industry, according to D. L. Moffett, vice president, 
Mid-Continent Petroleum Co. Henry G. Lapham, a director in The Texas Co. (p. 343), 
locks for chemistry to play an increasingly important part in the oil industry. Sir Henry 
W. A. Deterding considered tha industry to be in a very healthy condition last vear. but 
“expansion, however, depends on credit. To develop the industry properly will require 
hundreds of millions. * * * The production of synthetic benzine (gasoline) would be 
possible only if protected by high tariff. Most optimistic estimates are for only 50,000 tons 
(say 350,000 bbls.) a month by 1928.’’—Wall St. Jnl. 

The latest peak, of 2,505,000 bbls. daily, was attained in May, 1927, when Seminole cul- 
minated at 360,000 bbls. daily. The year’s yield may exceed 840,000,000 bbls. unless drilling 
is curtailed. Leading operators, alarmed at the super-flood—simultaneous with the over- 
flowing of ‘‘The Father of Waters’’—gathered in New York, May 11, and actually appealed 
to the Government for the protection of the industry against itself. 


370 OILDOM: ITS TREASURES AND TRAGEDIES 


CHAPTER XIV—PREVENTION OF FRAUDS AND FAILURES * 


“Are Americans people? Believe me, yes—the most criminally careless people in the 
world, the most easily gulled.”,—From Emerson Hough’s ‘‘Last Message to the American 
People.”’ 


INTRODUCTORY 


Extensive Evil Arousing Public Wrath. The World War wrought dam- 
ages in diverse ways. Much harm has come from the speculative spirit 
which during and since the war has spread to persons of all ages and con- 
ditions. It has been experienced even in our educational institutions. 
Lowered standards of honesty towards oneself as well as others have accom- 
panied this uneconomic epidemic. In the United States leading thinkers 
have realized this, and the result is the advocacy of special instructions in 
thrift, truthfulness, and honesty in our schools} and the establishment of 
agencies to discourage dishonesty, theft, and frauds. 

Noteworthy Work of the National Better Business Bureau. Among the 
latter may be mentioned the National Vigilance Committee of the Associ- 
ated Advertising Clubs of the World and its affiliated Better Business 
Bureaus in nearly 50 principal cities throughout the country. These agencies 
are striving for truth and honor in advertising of all sorts and have estab- 
lished investment departments in their organizations to assist the inex- 
perienced investor to obtain all the facts regarding a company whose 
securities are offered. In the operations of these investment departments 
a great number of frauds have been exposed and many thousands of dollars 
saved for the investors by giving them an intelligent understanding of the 
worthlessness of so-called securities they have inquired about.t 

Education of the Gullibles the Great Safeguard. ‘An ounce of prevention 
is better than a pound of cure.” The opportunity exists for an organization 
to coordinate all efforts to educate the public, particularly the coming gen- 
eration of business men and investors, so that disastrous speculation and 
fraudulent promotions may be minimized as much as possible. If hanging 
speculators who inveigle millions of dollars of hard-earned savings from 
the pockets and hiding places of poor people would restore these people 
their money, then the argument for hanging would be overwhelming. But 
when the money is gone any public concern is useless except the considera- 
tion of how such wholesale slaughter of human contentment may be pre- 
vented in the future. Encouraging report comes from New York that high- 
school students, as shown in an examination, are beginning to know a little 
less about baseball statistics and movies and a little more about De Valera, 
Lloyd George, Briand, and General Wood. But what high-school pupil, to 

*There would be no occasion to write this chapter were it not for the two traits of 
greed and ignorance. Very few of us do not have these in some degree. Swindling prac- 
tices would prove impossible if human beings were neither ignorant nor greedy, and if the 
knowledge thereof were not possessed by the fraudulent promoters. Mr. Ford evidently had 


education in mind when he contributed his page to the Dearborn Independent, of December 
i bye Bh eas 

‘Whether to be sorry for the victims of swindlers, or glad that they are getting experi- 
ence; whether to desire a spineless population never tempted to (commit) folly, or a 
strong people who are proof against it; these questions occasionally arise. * * * If 
rust-proof wheat is a _ possibility, surely folly-proof people are equally possible. The 
swindlers who take millions a year from the people would fail if people were swindle- 
proof; and most of them would be if they refused to heed tales of something for nothing.’’ 

+According to the Baltimore Sun, the Blue-Sky Committee of that city has been cooper- 
ating with the Public School Association in extending anti-fraud education. 

tRead ‘‘Protection of Good Will of the Oil Industry” by Lou E. Holland in The Oil 
Weekly, December 29, 1923. The National Vigilance Committee has been incorporated as 
the National Better Business Bureau. 


OILDOM: ITS TREASURES AND TRAGEDIES 371 


say nothing of the thousands who never reach high school, knows the first 
principles of investment and how to protect his savings from men like 
Ponzi and Chicago’s new wizard of high finance? There appears to be no 
limit to the gullibility of simple folk before whose eyes is dangled a vision 
of riches. A grounding in the first principles of safety in investment might 
save them later on from discouraged and broken lives. The public doesn’t 
love to be cheated. The appearance that it does is but a monument to its 
pathetic ignorance of financial security and responsibility.* 


WHY ROGUES AND IGNORAMUSES PREY ON PETROLEUM 


The Oil Business a Fertile Field for Imposition. There are crooks in 
every business, but if any business is new or novel or notably prosperous, 
and particularly romantic, then it will naturally attract not only the crooked 
promoter but also the ignorant interloper. It is not always easy to dis- 
tingush between these two agents—the one of fraud and the other of honest 
failure—for the ignoramus may be tempted to try the twilight methods of 
the fake promoter, especially when competing for the capital of small 
investors. Petroleum happens to have been peculiarly attractive to investors 
during the past decade. Development of the great Cushing field in Okla- 
homa and that of the Midway-Sunset in California were highly sensational, 
yet they did not give the grafters the opportunity that came with the try 
outs in Texas and the wildcatting in Wyoming. 


Magnetic Points About the Mineral Oil Industry. Here are some of the 
attractions which, for the past dozen years in particular, have made a 
lodestone of petroleum for investors and speculators: 


(1) The new developments were first carried on far enough away from 
the populous centers to make “distance lend enchantment to the view”; 
(2) these were later in part located near enough to the largest city on the 
Pacific coast to permit wholesale personal inspection of genuine gushers by 
tourists and other credulous investors; (3) the oil business more than ever 
before has proven romantic through its spontaneous and spectacular develop- 
ment; (4) vast fortunes have been quickly but honestly acquired by a few 
American operators in bonanza fields and the stories thereof have been 
given wide circulation; (5) through no other industry have suddenly so 
many American land owners of limited means been raised to positions of . 
financial independence;{ (6) two of the world’s largest corporations are oil 
companies with either physical assets or securities exceeding 1,000 million 
dollars each; (7) as a whole the industry, excepting the crude production 
branch, has been persistently prosperous, especially in regard to the “verti- 
cal” monopolists; (8) bona fide instances have been known of small com- 
panies declaring earned dividends ranging from 100 to 1,000 percent in the 
course of one or two years; (9) there are, as a rule, more ways to interest 
small investors in oil than in other branches of mining and manufacturing; 
(10) the gigantic growth of this industry, excelled only by the automotive 
business (in production of crude oil exceeding 200 percent in 11 years) 
has called for an enormous increase of capital for drilling, piping, tanking, 
and refining. These 10 reasons may be resolved into six groups: (a) 
Peculiarities of the natural resources; (b) speedy and spectacular develop- 
Wie Bditovial from the St. Louis Post-Dispatch, February, 1922. 


+Others as mere leaseholders and royalty owners have also made money without running 
the risks of the operators or lessces. 


372 OILDOM: ITS TREASURES AND TRAGEDIES 


ment; (c) continuous need for new capital; (d) examples of success; (e) 
diversified ways of making money; (f) great geographic range of the indus- 
try and its innumerable customers. 


A TEN-YEAR TALE OF TRAGEDIES. 


Rocky Mountain Wreckage. In early years the promotion of fake oil 
companies was done secretly and rarely were the newspapers used as aids 
in these promotion schemes. Not until 1914 and 1915, when the demands 
for oil became great and producing wells were drilled in wildcat territory 
in the Far West and Northwest, did these promoters start their work. 
Wyoming was used as fertile soil for these companies, and in two years 
$300,000,000 was obtained from the public by oil companies claiming to have 
valuable leases in the State of Wyoming. Denver was the headquarters 
for most of these companies. Literature was broadcast throughout the 
United States and glaring advertisements were inserted in daily and weekly 
papers and magazines. Of the $300,000,000 given these corporations, less 
than $10,000,000 was actually spent in the development of oil property. 
In contrast, it may be stated that the annual production of oil in Wyo- 
ming was less than 10,000,000 barrels before 1918; and of this amount a 
majority was owned and controlled by two large companies. These and 
other companies operating in the Big Muddy, Greybull, and Pilot Butte 
fields and not advertising stock for sale, produced and marketed 95 per- 
cent of the oil produced in Wyoming. It is safe to say that of the 200 
or more companies organized in Wyoming in 1918, 1914, and 1915, less 
than 25 ever drilled a well and less than five produced oil. Of the 
$300,000,000 invested, practically every dollar was lost; and of the corpo- 
rations which advertised extensively in these years only one was known 
to produce oil in paying quantities. 

Texas Tragedies Partly Told. The scene shifted to Texas following the 
big discoveries in the Ranger field in Eastland County and Burkburnett 
field in Wichita County. The promotion companies began activities in 
1917 and soon became very active in this state. Approximately 1,000 oil 
companies were incorporated within two years to do business in Texas, 
and eventually between 90 and 95 percent of them proved fraudulent, so 
that the “invested” money was lost. While Texas is the third largest 
producer and there are still valuable virgin deposits of crude petroleum 
in that state, probably 99 percent of the production and the proven terri- 
tory is controlled by the legitimate oil companies who do not advertise their 
stock for sale. An experienced oil investigator connected with the Gov- 
ernment estimated that 91 pct. of these 1,000 companies were organized for 
the sole purpose of selling stock. He figured that 60 percent of the money 
invested by the clients of these companies was for promotion purposes, 
20 percent for advertising, and 10 percent for overhead expenses; but 
less than 10 percent was actually spent for leases and for the drilling 
of oil wells. This investigation showed further that from 92 to 94 per- 
cent of the wells drilled in purely wildcat fields were failures, largely for 
lack of geological advice. Stockholders, by a common-sense method of 
reasoning, can figure out what chances they have to win by investing in 
these promotion companies. 

Nomadic Scoundrels Do Not Always Escape. The crowded scene in the 
Burkburnett field was only one part of the picture. With its development, 


OILDOM: ITS TREASURES AND TRAGEDIES 373 


together with that of Ranger, Fort Worth became the capital of a vast 
oil-promotion movement. In this bustling burg was mobilized almost over- 
night the largest group of persuasive stock artists that this country has 
ever known. They created a selling literature that Wallingford might 
have claimed with pride. One group, together with others of the same ilk, 
both at Fort Worth and Houston, were convicted of fraudulently using 
the mails and were sent to prison early in 1924. Like Ranger and Burk- 
burnett, Smackover temporarily (in 1923) became a paradise for unscru- 
pulous promoters. The development of this field in southern Arkansas 
came at a psychological moment, for it followed upon their activities in 
northern Texas.* 


Legitimate Dealers in Lands, Leases, and Securities. It must not be 
inferred that all transactions in oil lands or oil shares are fraudulent. 
There are many decent dealers in lands and leases located in the various 
oil fields and nearby towns. There are dozens of large legitimate broker- 
age houses in big cities which are advertising oil stocks for sale, but in 
practically every case these houses, before putting the stock on the market, 
make an investigation into the properties and their advertisements, while 
in most instances optimistic, are not misleading. There are also invest- 
ment bankers who deal in securities, but only for themselves and their 
friends, as a rule. Rarely do they deal in speculative stocks, but they will 
buy and sell bonds of the best oil companies. 


‘Honest But Ignorant Promoters. We have another group of promoters 
that have brought fully:as much, if not more, sadness and bitter experi- 
ence to investors than the crooks, and that is the ignoramuses or would-be 
oil men. Honesty alone is not the only essential in the management of an 
oil enterprise, or of any type of enterprise. Poor management is probably 
responsible for fully 60 percent of all business failures. In addition to 
honesty, the management must be capable and efficient. Have you ever 
met a great many inventors? How many of them show any business 
ability in addition to their inventive genius. We know of only two who 
are prominent today—Henry Ford and Thomas A. Edison. Yet thou- 
sands of inventors are almost as clever in other lines, but have not the 
business ability to put their ideas before the public eye. The same is true 
of. promoters—once. in one -thousand you will find a man who combines a 
business head with promotional ability. It takes a real business: man to 
make a real oil man. 


The Unscrupulous Promoter. There is in every community a class of men 
who make their living by their wit, cunning, and shrewdness. These are 
the men who readily enter the promotion game. Some have scruples and 
enter it with the best of intentions, and they conduct their operations in 
an honest and’business-like way. Many, however, are unscrupulous and 
have no regard for honesty and square dealing. This is the promoter of 


* The man most- active in the prosecution of these parasitic promoters was Edward A. 
Schwab, of the National Vigilance Committee.—I. F. Marcosson, Saturday Evening Post, 
April 19;.1924, page 205. This periodical ran a series of wordy: but wise articles on oil 
beginning late in 1923. The application of shrewd real estate methods were vividly set 
forth in the article on California. “Once the gold mine held out the irresistable bait 
for the people’s savings.’’ Hence Mark Twain’s maxim, “A, mine is a hole in the 
ground in which a fool drops his cash.”’ Today, despite the fate of the Dr. Cooks and the loss 
of more than $1,000,000,000 in the last.10 years in fraudulent oil stocks—it is difficult 
to arrive at the exact, losses because the suckers seldom squeal—John Jones pursues this 
phantom of the golden. gusher that .will make him rich overnight.—I. F, Marcosson in the 
Saturday Evening Post, May 24, 1924. 


374 OILDOM: ITS TREASURES AND TRAGEDIES 


whom the investor, especially the small investor, should beware. He is the 
“wolf in sheep’s clothing,’ whose sole object is to separate you from your 
hard-earned savings. He approaches the unwary investor with pleasing 
bait, promising great dividends, and giving out garbled statistics. He tells 
you the story of the man who had the opportunity to invest with Bell, 
but didn’t; the story of the man to whom Henry Ford offered an oppor- 
tunity to risk a couple of thousand dollars, and a few more such tales, 
followed by a list of about a dozen oil companies in which a hundred 
dollars would have made thousands. But does he truly offer you an equal 
opportunity? Certainly not! Sometimes he tells you a pretty story about 
the liquid gold that underlies a lease which he has just been able to pur- 
chase. He sends you a statement of some unheard-of geologist to prove 
his claims, or he selects a high-sounding name, typical of his ambitions, 
and tells you how morally responsible he really is, how philanthropic, 
how much he desires to do all the good that is possible in this world, and 
how dearly he would love to make you rich! But does he give you any 
method of verifying his statements? Certainly not! Perhaps he gives 
you the names of a few local friends—never anyone but his friends! 


Promotion Stock and Capitalization. An important item entering into 
the causes for losses in oil companies is the so-called “promotion stock.” 
When a promoter organizes an oil company he puts into that company 
certain assets, such as oil lands or leases, equipment, labor, or any one of 
a hundred other things which are of value to the company. For this he 
receives stock in the company. If he is honest, he takes only an amount 
in accordance with the real value of the assets, but if not, he places an 
inflated price on his labor, or properties, with the result that stock pur- 
chased by the investors is saddled with the heavy burden of making good on 
all the outstanding shares before the stock purchased by the investor can 
receive a dividend or profit. And in most of these companies the promotion 
stock amounts to 51 percent of the entire capitalization. 


TRACING THE CAUSES OF TRAGEDIES 


General Facts About Nonfraudulent Affairs. A few years ago a well- 
known efficiency engineer estimated that industrial efficiency in this country 
is not more than 40 percent, in some cases as low as 15 percent of what it 
should be, and on the average about 25 percent of attainable standards. 
The average efficiency of the worker was then 60 percent, that of the ma- 
chine 70 percent, that of the plant 70 percent, and that of material 86 
percent. Bradstreet’s Summaries one year gave the following reasons for 
failures: Incompetence, 38.2; fraud, 7.0; speculation, 7.0; inexperience, 5.6; 
neglect, 1.7; extravagance, 1.1; lack of capital, 30.3; failure of others, 1.7; 
unwise credits, 1.3; competition, 1.1; specific conditions, 11.3; total, 60.6. 


Faulty Management. From the above it appears that the management 
was directly at fault to the total extent of over 60 percent; but if we charge 
thereto lack of capital, then there falls within the control of management 
almost 91 percent! But in the particular case of oildom failures, the man- 


*Sample of a Seductive Song.—‘‘This is not a wildcat proposition. Ask any oil operator 
who is familiar with our holdings what they think of our proposition. Back your own 
judgment, use your own head, it might be better than the other fellow’s, after all. It is 
your investment that makes money for you. The person who is afraid to take a chance 
never gets very far. Read the record of all money-makers, and you will see that they all 
took a chance.” 


OILDOM: ITS TREASURES AND TRAGEDIES 9 BYO 


agement is not so badly to blame, because the natural hazards are so high 
in the exploration and development stages. Before considering the special 
causes for failures in the oil and gas business let us look a little into the 
elements of incompetence: First it is found that neither the so-called in- 
vestors nor the stock promoters monopolize all the ignorance current con- 
cerning the legitimate oil industry; the incompetent operator-manager of 
the ordinary small petroleum enterprise—all the way from wildcatting to 
refining and marketing, evidently commits many an error owing to ignorance 
alone.* Probably three fourths of the incompetence or fully one-fourth of 
all the failures is based upon deficient knowledge, not only of facts pertain- 
ing to petroleum in particular but also of fundamental principles of good 
business practice in general. Ignorance can be remedied, but certain other 
qualities in men of maturity can hardly be cured. One of these is inherited 
inability to make complete mental analysis of difficult situations that may 
arise; haste in arriving at conclusions is another; failure to cooperate or 
consult others, often based upon false pride, is a third; a fourth reason for 
the managerial incompetence is found in deficient psychology in regard to 
subordinates. The last is highly important with the oil industry because 
of the personal equation in its relation to the many hazards associated with 
the drilling of wells and the finding of oil. 


A RAFT OF REASONS FOR OILDOM WRECKS 


Grouping the Related Reasons. A canvas of oildom’s failures would 
reveal valuable information; but in the absence of statistical data it-is 
difficult to arrange the causes in the correct order of their magnitude. They 
may, however, be grouped under the following heads: (a) Capital or fiscal, 
(b) natural resources, (c) human labor and managerial, (d) physical and 
mechanical, (e) scientific or technologic, (f) economic or business, (g) 
legal. With unlimited capital, most of the other difficulties may be removed 
provided that common business sense controls the management. 


Why Would-Be Producers and Small Producers Commonly Fail. In the 
approximate chronological order in which they may occur, they are listed 
herewith 45 causes for the collapse of small oil companies or for their failure 
to make money for their stockholders. 


1. Wrong type of organization—simplest and least costly, a syndicate of 
fewer than 25 members. 2. Insufficient working capital—often due to ex- 
travagance in raising it. 38. Overcapitalization considering present net value 
of the oil property owned or leased. 4. Defective title to freehold or lease- 
hold. 5. Wildcatting away from port, railway, or market. 6. Testing 
worthless territory on advice of pseudo-geologist. 7. Neglecting to employ 
scientific or technical talent for whatever purpose needed (pages 40 and 43). 
8. No surface signs of oil deposits (p. 26). 9. Omitting structure tests 
before drilling deep wildcat. 10. Locating initial test off structure. 11. High 
dry-hole hazard of spotted district. 12. Abandonment or excessive cost 
because of greater depth to sand than anticipated. 13. Improper system of 
drilling—as rotary instead of standard or cable tools instead of core drill. 
14. Loss of hole through defective or incomplete equipment. 


15. Drillers dishonest or inexperienced. 16. Logs misleading or incorrect. 


*See foot-note, page 40, and “Economic Guidance,’ page 68; also Chapter XI, under 
“Losses.”’ 
+ Chapter 2. «Chapter V, particularly page 68. 


376 OILDOM: ITS TREASURES AND TRAGEDIES 


17. Unusual water or quicksand troubles. 18. Spacing too close. 19. Be- 
lated offset drilling. 20. Rigorous requirements as to time and number of 
tests. 21. Developing during high-cost or boom period. 22. Exhorbitant 
bonus for lease (pp. 314 and 318). 23. Royalty disproportionate to cost 
of drilling and producing or to income from working interest. 24. Cost of 
wells not paid out during flowing stage. 25. Inadequate or no marketing 
facilities when production is obtained during period of good prices. 26. 
Waste of oil or gas in various ways. 27. Short. life of wells or leasehold. 
28. Low percentage of ultimate recovery (p. 43). 29. Settled production 
rate overestimated or economic limit too high for profitable operation. 
30. Distance too great between home office and operating center. 


31. Storage lacking during period of depression. 32. High overhead 
expense as for salaries or office rent. 33. Living or other conditions unsatis- 
factory to employes. 34. Inferior quality of oil. 35. Low prices for prod- 
ucts. 386. Building pipe line without justification. 37. Activities limited 
only to the drilling and operating of wells. 38. Reserves not proven or 
acquired for future operations. 39. Incorrect cost accounting. 40. Paying 
rentals without a recommendation of a real geologist. 41. Paying dividends 
unwarranted. 42. Merging at wrong time or with undesirable concern. 
43. Buying or selling producing leaseholds without appraisal by a disinter- 
ested valuation engineer. 44. Opportunities of merit overlooked or declined 
without investigation. 45. Lack of perseverance in the face of discour- 
agement.* 

‘Why So Many Independent Refiners Fail. Some of the reasons why 
small producers fail apply with equal force to failures in refining, such 
‘as (2), (5), (80), and (84), stated above. Some refineries have been 
built in isolated fields of uncertain ultimate production and others were 
fitted for refining a certain grade of oil the supply of which became 
quickly exhausted. Most small and independent refineries are incomplete; 
they miss the profits to be made on by-products. H. G. James 7 recently 
declared that the weakness of the small independents, all too often, has 
been that they failed either in vision, or natural ability, or in command 
of capital. In times of prosperity. they overbuilt; they failed to create 
a surplus to carry them over the ever-recurring periods of recession which 
have characterized the oil business. To some extent they have been victims 
of the highly speculative character of oil and its rapid fluctuations. It 
has been claimed again and again that the dominant factor in the indus- 
try has crushed the weaker, and however we may look at it, it has always 
been, and will probably continue always to be, a question of the survival 
of the fittest. 


THE PREVENTION OF FAILURES 


Finding the Actual Facts. As many as: possible of the following facts 
should be ascertained before investing in any oil or mining venture. If 


_*A notable example of success through patience and persistence is that of the Union Oil 
Co. of Calif. in finding one of the -six greatest fields ever discovered within the United 
States. The first well in the Santa Fe Springs field was completed in 1919, although the 
big discovery did not come before 1921. The first production of oil came from a depth of 
4,595 feet after three wells had been drilled through a period of 10 years. It. took a little 
more than two years to drill the third. well. For this operator’s successful rejuvenation of 
its Santa Fe wells through gas lift see The Petroleum World. Dec., 1926. 

+ From speech before the Dallas meeting of the Western Petroleum Refiners Association 
printed in Petroleum Age, April 1, 1924. Mr. James, who died suddenly late in the summer 
of 1926, was one of the founders of the Am. Pet. Inst. 


OILDOM: ITS TREASURES AND TRAGEDIES 377 


particular at all about the source of your information, and your banker 
is too busy, or your lawyer has left for some legislative hall, and no 
better investment adviser is available, don’t hesitate to call on a reputable 
geologist or engineer familiar with natural resources. 

First. The charter should be examined by a competent legal authority, 
to see that the preliminary work of organization has been properly carried 
out, so that all shareholders are assured of their rights and adequate 
protection. 

Second. Expert accountants should verify the books and records of the 
company, and well-versed oil men should make an appraisal of the hold- 
ings to arrive at the true value of the assets behind the amount of 
capitalization. 

Third..The cost of transporting the rigs and materials to their locations, 
also the cost of fuel, water, etc., should be estimated, to determine the 
probable cost of drilling a well in the contemplated localities, allowing a 
reasonable amount for contingencies. 

Fourth. The manner in which the wells in the vicinity of their holdings 
hold up should be investigated, to determine if a well drilled would show a 
sufficient profit to pay for the money spent in drilling it. 

Fifth. How much of the oil well is the investor buying with his cash? 
Unless he can determine this with approximate accuracy, he would do well 
to seek for some other form of investment. 

If it is a lease which is being offered for sale, the investigation should 
include: 

First. The location with respect to present operations, and the type of 
wells found in that vicinity (the larger the wells, the greater their value). 

Second. The length of time for which the lease is made out, to determine 
that it is for a sufficiently long term to allow developments to get nearer if 
far away at present. 

Third. The rental to be paid to the property owner. (Some rentals are 
exorbitant and lessen the value of the lease, especially if it is expected to 
be held for some length of time.) _ 

Fourth. The status of the title should always be carefully gone into by 
competent legal authority. 

Fifth. The recording of the assignment or lease in your own name 
should be promptly taken care of. 

Distinction Between Gross and Net Present Worth. An oil lease may 
contain 1,000,000 barrels of oil when oil is selling at $2 per barrel. This 
does not imply that the lease is worth $2,000,000. First, there is to be 
deducted from this the payment for royalty, usually one-eighth of the oil; 
then there is the cost of development and equipment charges spread over 
the life of the property, following’ which are expenses for pumping, trans- 
portation, and other operations. These may amount to $250,000 for 
royalty and $750,000 for developing and operating. Since the remaining 
$1,000,000 is not obtainable at once, but is returned gradually throughout 
a period of several years, it will be necessary to discount this sum to get at 
the present worth of the enterprise. 

Double Discount—For Time and Risk. Raut an ‘ordinary oil venture, a 
discount factor of 10 percent is not too high. This would further reduce 
the $1,000,000 to about one-half to three-fourths thereof, depending upon 
the estimated life of the property. The result would approximate the 


378 OILDOM: ITS TREASURES AND TRAGEDIES 


value of the property, without allowing anything for profit in excess of the 
10 percent interest. Since this industry is so hazardous, the interest rate 
is not a safe margin for profit on investment. The $500,000 should be 
further discounted by the amount that one would expect to get on the 
return of his money as a profit. This should not be less than 15 or 20 
percent, so that the net value that a prospective purchaser should pay for 
an oil lease or property, with 1,000,000 barrels of $2 oil, would not be in 
excess of $400,000, or about one-fifth of the market price of oil multiplied 
by the number of barrels believed to be recoverable from the property. 


Reduction of Risks. Every business has its hazards; even banking is 
exposed to burglars, robbers, and swindlers. Farming runs risks from 
droughts, frosts, floods and fires, and insect foes. But no other industry is 
looked upon as quite so hazardous as mining, whether measured in terms 
of money, efforts, lives or limbs. . In general, largely because of differences 
in their natural occurrence, the degree of financial risk within the mineral 
industry is least in quarrying building materials, making cement, liquid 
mining of salt and sulphur, and strip mining of coal. Natural gas, iron, 
copper, lead, and zinc are much less risky to the ordinary investor than are 
silver, gold, petroleum, and precious stones. 


In the case of oil finding and production the element of risk influences 
failures perhaps more than the questions of costs and wastes. Several 
kinds of risks enter into petroleum operations as a branch of the mineral 
industry. They include, (1) natural hazards, geologic* more than geo- 
graphic and climatic; (2) physical or mechanical; (3) those purely finan- 
cial; (4) commercial-economic; (5) human hazards affecting life, limb, 
and health. ‘These differ in degrees according to the stage of operation: 
(1) Finding or wildcatting; (2) development or drilling for production; 
(3) production; (4) transportation, especially by tanker; (5) refining; (6) 
marketing; and (7) utilization. Then there may be considered, further- 
more, the classes of people concerned, such as (1) the investors; (2) the 
pioneers and honest promoters; (3) the professionals, including geologists 
and engineers; (4) the employe; and (5) the consumers. 


Cutting Down the Costs. This may be accomplished by the lessee having 
ample time to prepare for drilling; by selecting the proper equipment; by 
employing a conscientious contractor, or competent drillers if the work is 
done by the day; by judicious buying of used but serviceable machinery, 
tools, and supplies; by avoiding superfluous overhead expense; by promptly 
cementing water sands; by operating in settled districts during normal 
periods. 


HOW TO WIN IN WILDCATTING 
The financial perils threatening established enterprises in production, 


transportation, refining, and marketing have been touched upon in the 
preceding chapter. Since the largest losses to ordinary investors are 


*One remedy for failure is to study painstakingly the geologic structure in the oil- 
bearing beds as revealed by well records; to determine the shape, outline, and position 
of the anticlines; and then to determine the relation between the structure far below 
the surface and that at the surface. Some of the strong companies have undoubtedly 
made such studies, but most of them guard jealously such information as they have 
obtained. The United States Geological Survey, Department of the Interior, is furnishing 
some assistance in the exploitation of the oil and gas resources of the country by publish- 
ing reports describing in detail the surface rocks in promising areas and containing maps 
showing the structure of the beds. These reports are sent from the Geological Survey at 
Washington to anyone requesting them. 


OILDOM: ITS TREASURES AND TRAGEDIES 379 


incurred invariably in the preliminary stages, special attention will here 
be paid only to the risks relating to the finding and developing of oil and 
gas deposits. However, accompanying illustrations and references for 
readers cover such other subjects as “Fire and Explosion Hazards on 
Sea and Land,’* “Safety in the Petroleum Industry,” etc., which pertain 
to the going concerns among which failures are comparatively infrequent. 
There are several steps that may be taken to insure success in drilling 
for oil. 

1. Employ a reputable geologist. Of wells located at random, even in- 
attractive territory, not over 5 percent prove productive; of those scientifi- 
cally located, 85 percent succeed. The prospector, not led by signs or science, 
has about one chance in one thousand of striking oil. 

2. Give this geologist a chance to choose from several tracts, or if but 
one area is under consideration give him time to investigate the surface 
signs. A thousand dollars thus brings better results than ten thousand 
devoted to a dry hole. 

3. If these signs do not definitely evidence the oil structure (with or 
without complete closure) which is suspected to exist, then arrange for 
shallow structure testing with core drills with three or four holes as the 
minimum, 

4. If blind wildcatting is preferred, give yourself at least one chance 
in twenty by drilling neither in granitic nor in lava rocks and by locating 
all tests in sedimentary or stratified rocks neither too old or entirely flat.* 

5. If staking all on one test favorably located, “drill deep or touch not 
the petroleum spring.” Be sure before abandoning the attempt. A dif- 
ference of a dozen feet often spells success or failure. 

6. Be sure your funds in sight suffice for completing at least two or three 
tests if operating in a promising area. Control can easily be lost at critical 
times, and minority stockholders can be readily frozen out. 

7. If the choice is yours, prospect in a major field where the oil is of 
high gravity or rich in gasoline content. Your product may be worth a 
premium if you strike oil. 

8. Do not acquire a leasehold at the very peak of excitement and specu- 
lation near a newly discovered field. An exorbitant bonus or excessive 
royalty may make your venture unprofitable. 

9. Do not wildcat out in the wilderness where costs of development are 
prohibitive and where markets and marketing facilities are absent. The 
San Juan field in southern Utah is a case in point. Those who years ago 
found oil there have yet to receive any returns. 

10. Lease up as large an area as possible (without rentals) for your own 
protection so as to cover the entire structure if you are wildcatting on the 
strength of a real geologist’s favorable report. If possible, do this before 
spudding in or even erecting the derricks; certainly before drilling very 
deep. This will permit subleasing to yield profits in various ways, as 
through over-riding royalties. 

*Serial No. 2400, September, 1922, by Katz and Smith, of the United States Bureau 
of Mines, is one of these. A general article by H. Foster Bain appeared in the Oil 
Weekly, December 9, 1922, others in the issues of December 22-29, 1924. 

*Sixty percent of the United States will not produce oil under any circumstances— 
simply is not made of the right stuff. Out of the remaining 40 percent of the 2,000,000,000 
acres of land 98 percent, or 784,000,000 acres are not built right to produce oil, or in 


technical language is “off structure,’’ according to the consensus of American petroleum 
geologists. 


380 OILDOM: ITS TREASURES AND TRAGEDIES 


11. Save the rock cores, or have the well log kept as perfect as possible 
and certified to by both the head driller and the geologist, so that you may 
induce a substantial established operator to take hold of your enterprise if 
the showings are attractive without actual production and if your experi- 
ence or capital, or both, do not suffice for success. Your retained interest, 
in whatever form, may be made highly prepa ie without further risk and 
trouble on your part. 

12. Do not drill into the highest spot of the suspected or outlined structure, 
for several reasons. One is to avoid early exhaustion of the natural-gas 
' pressure so essential to maintain flowing wells from points further down 
on the structure. 

13. Put down drill holes. well away from property lines to aod ie 
waste and expense of drilling many offset wells and otherwise, too, avoid 
close spacing which may eat: up. profits in the event oil is discovered and 
you begin development campaign. 

14. Keep costs down in the discovery stage by employing preferably a. 
core drill, and in general thereafter by contracting for the development. 
The former should eliminate the usual heavy expense for casing and the 
latter will roughly limit the costs. See also points 9 and 13. Remember, 
you can prove a structure with three or four core drill tests at less than 
one-third the cost of one ordinary deep test with cable tools or at less than 
one-fifth the cost of a deep test with rotary tools. You can probably out- 
line the limits of an entire small ‘structure with 10 or 12 shallow tests for 
the cost of one deep well.* 


Wastes in Wildcatting, especially of capital, count for much more than 
in the producing stage. Here are a few helpful suggestions to honest and 
conscientious wildcatters. Do not sacrifice a large part of your capital in 
paying big commissions for the sake of an early start in drilling. ‘Choose 
a favorable season of the year or a region where you need not waste half 
your capital on road building. In fact, avoid making any permanent im- 
provements if possible until after you have made a substantial discovery. 
Do not offer free trips to stockholders, and curb your own curiosity in the 
event that your operations are far away and you have dependable drillers. 
Make no effort to bring in a well until you have facilities for control or 
for storage and transportation; otherwise you may waste enough oil or gas 
in a few days to pay for a year’s experienced efforts.. 


BLUE SKY LAWS ee 


There are fashions in swindles just as there are in milady’s frocks. It 
is hard to sell gold mining” stock in an oil. year, just as it is difficult to 
dispose of shares in a sugar-growing corporation at the time iors: the fish 
are biting most freely on cord tires. 


* “Diamond Drill a Wildcat Aid,’’ M. O. Danford in the Midwest Review, 1921. 

“Barrels of Money and Plenty, of Nerve.’’—The. Oil & Gas Journal, Sentember 13, 1923. 
(A 6,680-foot dry test of the Standard Oil Co., of California cost $800,000.) “Developing 
a Property for Sale to Professional Operators.’’—Story of how Edgar B. Davis discovered 
Luling, spent a million after abandoning a $75,000 dry hole, but produced nearly 10,000,000 
barrels of oil before the middle of 1924. See The Oil & Gas Journal, June 5, 1924, pages 
123-4, 

“Hints on Oil Prospecting,” surface indications and manner of occurrence, where found, 
the best place to drill—Press Notice, No. 14, 117 U. S. Geological Survey. 

“Petroleum: Where and How to Find It.” By Anthony Blum, 367-page book. D. Apple- 
ton &\ Co., 1922. 

“Hints to Stock Buyers,” in Bulletin. No. 116, Oil Series No. 4, .by G. M. Bukler and 
M. A. Allen, University of Arizona, Tucson, 1921. 


OILDOM: ITS TREASURES AND TRAGEDIES 381 


Excusing the Existence of Charter Mills. All kinds of defences are 
offered for the existence of the charter mills in Delaware, Arizona, and one 
or two other states; principally, however, Delaware. Delaware issues char- 
ters at the rate of about 5,000 a year, of which it has been estimated 98 
percent do not survive five years. They last just long enough for the pro- 
moter either to sell all of his stock or to realize that he has not picked a 
winning scheme. A great many states have organized security commissions 
which popularly are termed blue-sky commissions because their purpose is 
to prevent the swindling stock salesman from selling the blue sky to the 
credulous. States that have advanced to this point are a reproach to such 
states as Delaware, for when you get right down to it the blue-sky com- 
missions in this country could cease functioning tomorrow if every Delaware 
and similar charter were wiped out. The blue-sky commissions, in fact, 
represent the arming of the state to protect its citizenry against the invad- 
ing robber. 


Protection in Particular for Impecunious People. We need not worry 
about the rich widow who is taken in by a spiritualist confederate of a ring 
of crooks, or the retired manufacturer who drops $50,000 or so in a stock 
swindle. Whom we should worry about is the small (or nonunion) wage 
earner who is concerned with the future of his family. He scrimps and 
saves. He makes up his mind to invest his money so as to have an inde- 
pendent income in his old days. He gets a nice little nest egg together. It 
is not merely a little hoard of dollars; it represents the sweat of toil, fre- 
quently the suffering that comes from self-denial. Then comes the glib- 
tongued promoter with his window display—and the nest egg is gone! 


Retail Dealers Require Defense. The small merchant, the corner grocer, 
the butcher, the baker, the candlestick maker, all these are interested in 
the campaign to wipe out fraudulent stocks and punish those who sell them. 
It is the business of every chamber of commerce and of other commercial 
organizations in the United States to keep close watch on the itinerant 
stock salesman. It is the duty of such organizations to appoint vigilance 
committees, extra-legal blue-sky commissions, to make inquiry and report 
upon every stock offering that may be made to the people within its com- 
munity. Concerted action by all the chambers of commerce will drive the 
crooks away.* 


Earmarks of Frauds include the following: (1) Large and flaring adver- 
tisements; (2) fancy office quarters during wildcat stage; (3) more stock 
salesmen than drilling wells; (4) promise of early listing on a stock ex- 
change; (5) inability to produce an original favorable report by a reliable 
geologist; (6) effort made to stampede the investor; (7) exaggerated 
claims based on production of wells distant over 2 or 8 miles; (8) possi- 
bility of failure not admitted; (9) liberal quoting of successes in far-away 
fields; (10) display of expensive photographs of unrelated oil fields. Elab- 
orate plans for refining mentioned before production is assured.’ Control 


*The Magazine of Wall Street. See also reference to the Better Business Bureau at 
the beginning: and end of this chapter. The Investment Bankers Association is also active 
in educational campaigns to show investors how to distinguish between safe and uncertain 
securities. According to E. E. Shields, chairman of the Blue Sky Committee of the 
Pennsylvania Bankers’ Association, the ‘“backbone’’ of the law in the Keystone state is a 
clause which stops many promoters before they have a chance to operate. Two of its 
vital points relate (1) to an intentional failure to disclose a material fact, and (2) to 
any form of promotion fee or commission that is “‘so gross and exorbitant as to appear 
unconscionable and fraudulent.” 


382 OILDOM: ITS TREASURES AND TRAGEDIES 


retained by promoter without paying anything for leasehold or sharing 
materially in the drilling expense. Claiming chances of success exceed or 
even equal those of failure. Salaries paid to officials before production 
obtained. Dividends paid or promised within a very short time or before 
any oil or gas can possibly be produced. Claiming production on one or 
more sides of a leasehold for which no cash has been paid. Capitalization 
plainly excessive considering area of holdings and absence of production. 
Inability to give good, unprejudiced references. Withholding answer to such 
a query as “How much of the expected production do I get for my cash?” 

Six Stock Salesmen to Be Avoided: (1) The man who tells how stock- 
holders in similar concerns waxed wealthy over night; (2) he who wants 
your help in “keeping the deal away from Wall Street”; (8) he who talks 
about the “transferability” of the stock; (4) he who says the stock will 
- later be “listed on the exchange’; (5) the one who wants you to buy be- 
cause “the price is surely going up”; (6) the man whose chief selling points 
are letters of recommendation from “leading citizens.” 

Hammond’s Ten Don’ts. John Hays Hammond’s rules for investors in 
mining stocks, with the substitution of the word “oil” for “mining,” are 
applicable and to the point in connection with the conservation of capital. 

(1) Don’t invest your money in an oil property simply because of the 
fact that a friend of yours became rich through a fortunate investment 
made in oil stocks. (2) Don’t, on the other hand, be deterred from investing 
in an oil property because another less fortunate friend became bankrupt 
through some other oil investment. (8) Don’t allow any insinuating, slick, 
dishonest promoter or so-called stock broker to overcome your natural 
modesty and convince you that, because you have been successful in your 
own line of business, you yourself are competent to determine the value of 
an oil property. (4) Don’t be influenced in your desire to purchase oil 
stocks by a bottle of oil that the property has produced, even though you 
yourself have seen the oil actually on the ground. This is similar to speci- 
men rock in a mine, which is not a criterion of the average grade of ore 
upon which the success of the mine depends. (5) Do not buy stock in an 
oil property because it has produced a profit of millions of dollars in the past, 
for the property is obviously so much poorer for the millions already ab- 
stracted. (6) Do not buy stock in an oil company simply because of the fact 
that its property adjoins another oil property of great value. That may be 
interesting, but it is not conclusive as to the value of the property in ques- 
tion. (7) Do not buy stock in an oil property solely because it is in a far-off 
country, even though distance lends enchantment to the view. (8) Above 
all, don’t buy shares in an oil property unless you have the unqualifiedly 
favorable report made by an oil expert of known integrity, ability, and 
experience, and one who has made a success in investment of money for his 
clients. (9) Don’t buy stock in an oil property unless you are sure that the 
board of directors are honest and competent, because good management is 
just as essential to success in oil production as it is in other enterprises. 
(10) In short, don’t abandon all your good common sense just because the 
investment happens to be one in oil and not in some other class of securities. 

“Bach year over $500,000,000 is lost in this country through fraudulent securities. 'Prob- 
ably 30 to 40 percent thereof in oil affairs.—Author.) This huge sum goes largely into 
the pockets of swindlers. The most unfortunate aspect * * * jis that much of. this 
waste of hard-earned capital could have been prevented if the investment seekers had taken 
the trouble to make a prover investigation * * * or to consult some competent adviser 


before buying.”—Andrew G. Mellon, in a letter, January, 1927, to Adolph Lewisohn, chair- 
man, Nat’l Thrift Committee. 


OILDOM: ITS TREASURES AND TRAGEDIES 383 


QUESTIONNAIRE OF THE BETTER BUSINESS BUREAU 


ITM ATCRUO TE COE UL ACTON Meta Cet oi, ti nod, wcdcelein a even erecta ereterar eet e oF okie wee ah 
eee TCSIS bie SU et Satyr, tn cet LT ae ian. ens When ey A ivel ts 2k ep weeks io vg 
Has the company or corporation operated under any other title? ........ 


RICE COL ae DIISITICSCHee eee ree fc orth Secs le GW reiald a aoe Vleet ble o Bb eb eek 
OFFICERS ADDRESS 
ee ER ERA ree ee ee ee tc ys iy one bie. ahcdhh ov ee che coe 


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eV ALE StALEAINCORDOTALEG! 21.5}. ees ele os 1B TREAT, Be ecg eee en ee mel 15 
Name and address of incorporators, number of shares held by each, and 


amount paid thereon: 
Name Address Shares Amount 


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Seems: W810. 6-6) 6 16, me) @) 6) 8 8.646 0) @ © -6)e Oe) ef; 8 © Oo (e, 6/) BD 8) @ 4 s.6' 0 16 6 0 ©: © 16 ive 6 € 9 6s 0 8 ee oe we sev eo 6 © 


Name and address of directors, number of shares held by each, and 
amount paid thereon: 


Name Address Shares Amount 
SEU ATHOT 1 TDTINCHIAL OLNCEh «oak. deg cletare so cc oo SR we vie tin c/o ele wisle bie © ele 
Name and official title of person or persons in charge: ............+-..- 
Amount of capital stock authorized, $.......... Parsvaliesis eo. 
Into how many shares divided? Preferred ......... CroTAMon oe. vets 
How many shares issued and outstanding? Preferred ......... Com- 

Ae lees 
How many shares issued in exchange for services rendered? .......... 
Ri NrEewW aga LHe maura OStSUCHABEINIEE..~.. cuca sires t+ old y aye baie whe Gloisie exes oa 
What, if any, is the present indebtedness of the company or corporation 
SGP UPA OPN IONS. NOLES.) ClCeh thon. cts ee ceie sole pM ale ghey eimue Puts 


Were any shares issued for property acquired; if so, how many and to 
RTL CN aDieaee AMM RRIy See SRS. AS Ne CIA Ch) Masai Slane Ghee Bile 4 “allee’S ale a atMaley cided Rivals 
Names of individuals or corporations with stock sale contracts or under- 
iii ener COCATION Caer ete ht acts ccs kre coe ik de elle oo anne STAM ot eee ee tang 
Pm tAricer WAS. BtOCK “ACTUSILVS SOIUM co ct eis oo i.0 whe: tle «SOM OM oy oe a aide ast 
Have any shares been assigned free? If so, how many, to whom, and for 
De SIME TVELT CCE Rete tk ee een Ae T gD te - Chariecigter 75 SU5GN ope dace ona le 
What is the total amount of money actually invested in the property 
and improvements? ........ ROME ON te oe oe atest o Sos cons Maar ee of ave atte’ chet t 


STON i sh Ste aed RS ea RIOD TOMOMETICS farts. Ce ee yedeee sh Sens given Me 
Has a dividend been paid on stock; if so, when, and in what amount? 
Ce Ly, SR arta CCoee Ol SUOCK.. eat citaiar ss 28 Uk cL encod 


Has such been paid from actual earnings or from payments by stock- 
FO 5 en a Mc tr ete gk, ce, vialvatie «Coa ahd eich ole ots cdi oe de rake 


In what manner was the original property acquired? From whom? ..... 
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Dew ae OCs LES DLODETLY: TIO W COTSISU Lica succe bin 2 cha ele atte afdhe oan chncs, oreo eh 
What is the present assessed value of the property? Real, $............. 
USES Ae OE PR aa eas 


INSIDER LOSLOCK (SALCSDIATS scene oss ote ood ce ACOLCSS Se ccwe Sauk ee ORE te 


384 


OILDOM: ITS TREASURES AND TRAGEDIES 


Local Bureaus 


Located In: 


AKRON, OHIO 
BALTIMORE, MD. 
BIRMINGHAM, ALA. 
BOSTON, MASS. 
BUFFALO, N. Y. 
CANTON, OHIO 
CHICAGO, ILL. 
CINCINNATI, OHIO 
CLEVELAND, OHIO 
COLUMBUS, OHIO 
DALLAS, TEXAS 
DAYTON, OHIO 
DETROIT, MICH. 
FORT WAYNE, IND. 
FRESNO, CAL. 
HOUSTON, TEXAS 
INDIANAPOLIS, IND. 
KANSAS CITY, MO. 
LONG BEACH, CAL. 
LOS ANGELES, CAL. 
LOUISVILLE, KY. 
MILWAUKEE, WIS. 
NEW YORK, N. Y. 
OAKLAND, CAL. 
PEORIA, ILL. 
PHILADELPHIA, PA. 
PORTLAND, ORE. 
PROVIDENCE, R. I. 
ROCHESTER, N. Y. 
SAN DIEGO, CAL. 


SAN FRANCISCO, CAL. 


SCRANTON, PA. 
SEATTLE, WASH. 
SPRINGFIELD, MASS. 
SPOKANE, WASH. 
STOCKTON, CAL. 

ST. LOUIS, MO. 


ST. PETERSBURG, FLA. 


SYRACUSE, N. Y. 
TACOMA, WASH. 
TOLEDO, OHIO 
UTICA ANS. 
WASHINGTON, D. C. 


Business Cooperates 


—with the Better Business Bureau 
OIL ENTERPISE 


----or Stock Promotion? 


Securities of well-managed oil companies 
have yielded handsome returns to their 


-holders. Such sound oil enterprises should 


not be confused with promotions conducted 
only to unload stock in paper companies upon 
the public. 

Analysis of one oil boom revealed that 
stock-promoting companies owned but two- 
tenths of one percent of all oil produced in 
that state during the year. For every $550 of 
capitalization but $1.00 worth of oil was pro- 
duced by these companies. | 

Impressive certificates are now sent broad- 
cast which recite the fact that the recipient is 
the owner of “units of beneficial interests” in 
a Declaration of Trust operated and man- 
aged by a so-called trustee. Remittance is 
solicited at the rate of 50 percent of the “par 
value,’ usually $1.00 per unit. Some certifi- 
cates contain the statement “a square deal 
guarantee speculating for profit.” 

Before sending funds to purchase “units of 
beneficial interests” or “participations in oil 
royalties,’ get facts as to the organization 
in question; find out what future personal 
legal liabilities may be involved in such par- 
ticipation; obtain information as to the 
powers of the “trustee” who operates such 
projects; and facts as to his business history 
and fitness to act as your trustee. 

The appearance of this advertisement in 
these columns is an indication that this 
publication subscribes to the principles of 
the National Better Business Bureau and is 
in agreement with the Bureau on a definite 


policy of cooperation for the protection of 
reader’s confidence in advertising. 


National Better Business Bureau 


(Incor porated ) 


383 Madison Avenue, New York City 


This organization is supported by reputable American business 
institutions and operates without profit, to promote fair dealing 
and integrity in the written and spoken word. On request, we 
will furnish reliable information regarding investment offerings. 
Our service is offered without charge. We have nothing to sell. 


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INDEX 


A 


Abrams No. 1 well, The Texas Co., 162, 
320. 

Absorption method, gasoline, 109. 

Accounting, uniformity in, 307, 314. 

Acre yield of some pools, 70, 366. 

Adv. Clubs of the World, Associated, 106. 

Agriculture, 9, 20, 61, 66, 119, 123, 186, 
301. 

Airey, Richard (Shell Union), 16, 350. 

Alamo pool (Penn-Mex. Fuel Co.), 226, 
234-5. 

Alaska, 25, 253, 259. 

Alcohol, substitute motor fuel, 119. 

Algeria, French . prospecting, 16. 

Allegany-Bradford field, 72, 367. * 

Alsace oil mines, France, 16, 43. 

Amalgam of coal and oil, 99. 

Amarillo (Panhandle) pools, 33, 145. 

Amerada Corporation, 276, 320, 336, 367. 

America lubricates world’s machinery, 181. 

America’s coal resources, 204; oil, 19; oil 
production, 2238, 233. 

American Academy of Pol. & Social Sc., 
131; — Chemical Society, 280. 

American bottoms for oil exports, 172; — 
development abroad, 12, 207, 217, 222, 
227; — Institute of Min. & Met. Engrs., 
publishers of Mining & Metallurgy, 11, 
14, 35, 44, 47, 79, 89, 103, 113; 120, 200, 
212, 214, 215, 216, 221, 236, 306-7, 308, 
313, 317, 319; — Petroleum Institute 
(A. P. I.), outgrowth of Natl. Pet. War 
Service Committee, 299; see also 103, 
E. C. Clark (pres., 1927), Tom O’Don- 
nell (1919-24), W. S. Farish (1926), J. 
Edgar Pew (1925), R. L. Welch (Secy.), 
and “Supply and Demand” (report by 
Com. of Eleven), 262. 

Amundsen’s schooner ‘‘Maud,” 17. 

Andian National Corporation, 217-18, 360. 

Andros, S. O., Petrol. Exten. University, 
360. 

Anglo-Persian Oil Co., 12; refineries, 188-9. 

Animals, extinct, 5, 28-29. 

Anticline, anticlinal structure, 22, 24. 

Appalachian field, 22, 24, 31, 37, 39, 141. 

Appraisal committee, Indep. Oil Producers’ 
Agency, 318. 

Appraising versus bookkeeping, 319. 

Appreciation through discovery, 319. 

Archbold, John D., 638. 

Archer, W. J., author, “Mexican Petro- 
jeum. 107%. 208,° 214; 220; .221,- 250; 

Areas, comparison of shapes, 144; major 
fields, 39; oil states, 147; pools, 167. 

Argentina, 14, 19, 196, 198, 209-212. 

Arkansas, 26, 31, 33, 80, 98, 142, 149, 150, 
158, 170; (2333. 302, 3823; 366: 

Armenia and Asia Minor, 9, 10. 

Arnold, Ralph, consulting geologist, 35, 
(ies, 204,256; 279, 281, 299- 

Art Metal Construction Co., fireproof fix- 
tures and furniture, 385. 

Asia, 7, 11, 14, 18, 19; see China, India, 
etc., 135. 

Assets, of the industry, 303; of independ- 
ents, 348; of Gulf Oil Corp., 348; of 
Standard of Ind., 346; of states, 301-2. 

Associations: A. P. I., 299; A. I. M. & 
M. E., 131; Am. Petrol. Geologists, 311; 
marketers, 92, 315; Mid-Cont. Oil & Gas, 
92 117s alson4al,-L0d p11, db: 

Atlantic Monthly (Leo Pasvolsky), 7. 

Atlantic Refining Co., 355 (see Com- 
panies) ; — Seaboard, 21, 53, 88-90, 
171-2, 175. 

Atlas of Commercial Geology, 22, 31, 94. 

Australia, 16. 

Authorities (see Chemists, Economists, En- 
sid Financiers, Geologists, Lawyers, 
etc.). 

Automotive Engineers’ Society, 119; — 
industry, unit output, 83. 

Averting tragedies, world, 10; investments, 
370, 376. 


‘ 


B 


Bain, H. Foster, secy. A. I. M. & M. E., 
ex-director, Bur. of Mines, 59, 285. 

Bakersfield, Kern Co., Calif., 138, 258. 

Balance sheet, crude oil business, 321; The 
Texas Co., 341. 

Baldwin Locomotive Works (Vauclain, 
350), 367. 

Baltimore, oil port, 20, 88, 139; refining 
center, 170; tank building, 274-5. 

Bank relations, 302, 357-8. 

Barneson, Lionel T., 300, 331. 

Barnsdall, see under Companies. 

Barranca-Bermeja, Colombia 215-219. 

Barron, Clarence W., financial authority ; 
pres., Dow, Jones & Co., pub. of The 
Wall St. Jnl.; founder of Boston News 
Bur. and Phila. News Bur.; 8, 164, 290. 

Barron’s, 337, 348, 350-2, 358, 369. 

Bartlesville, Okla., 138, 249. 

Baseball comparisons 66, 272. 

Batavian Petroleum Co. 368. 

een N. J., refining center 88, 139, 
70. 

Baytown (50,000 bbl.) refinery, Tex. 348. 

Beal, Carl H., geologist, 250, 256, 281. 

Beaty, Amos L., 245, 283; chairman, The 
Texas Co., 338; address before Oil Board 
268, 343, 361. 

Beaumont, Tex. (see Spindle Top) 40, 
170, 304. 

Bedford, Alfred C., late chairman, Stand- 
ard Oil Co. of N. J.; founder, A. P. I.; 
10, 31, 298-9. 

Benedum, M. L. and J. C. Trees 217, 304. 

Beneficiaries 293-7. 

Benson, R. D., chairman, Tidewater 69. 

Benzol, gasoline substitute 119. } 

Bergius, F., (see Hydrogenation). 

Better Business Bureau 363, 370, 381, 383-4 
(see Nat’l Vigilance Committee 106). 

Bibi-Eibat field, Russia 26. 

Big Lake 142, 162, 166; see Reagan Co. 

pe buyers, U. S. oil 184; Mex. oil 

Bird’s-eye view 264, 801. 

Bjerregaard, A. P., chemist 280. 

hee Goleanda,’”’ Marcosson’s 244, 252, 

5. 

Blair, David H., Com’r Int. Rev. 248. 

Blardone, Mex. authority 224, 232. 

Bolivia poorly situated 208. 

Bonded debt, companies without 361. 

Bonds and stocks (see Securities). 

Bonuses 306, 310-11, (Osage County) 315-6. 

Boston, oil port 20, 139. 

Boston News Bureau 77, 290, 321, 324. 

Bottom settlings ‘‘b. s.’’ 54. 

Bowles, Chas. E., asst. sec’y, Mid-Cont. 
Oil & Gas Assn. 169, 302, 360. 

Bradfordfield, McKean Co., Pa. 72, 145, 
(see Bradford-Allegany 366). 

Branner, J. C., late Calif. geologist, 209. 

Brazil, unexplored area, etc. 209. 

Brenner, H. H., Pawhuska banker 295. 

Bridge, Dr. Norman 291-2. 

British authorities; Cadman 11; Cowdray 
278; Cunningham-Craig 23; Curzon 17; 
Liggett 87; Redwood 227; Waley-Cohen 
316 director, Shell Union 350; see also 
Oil News and Petroleum Times, London. 

British development 213, 222, 228. 

British India, see India. 

British petroleum trade 187-90, 369 ;—wild- 
eatting, capital expended in, 16. 

Brown, Robt. W., val. engr., author 318. 

Bryan, John C., 63; Barnabas 206. 

Burbank field 79, 142-5, 160, 295, 366 (see 
Marland and Osages). 

Bur. of For. & Dom. Com see Foreign. 

Bureau of Mines, see Mines. 

Burkburnett, Tex. 62, 64, 148, 164, 166. 


o 


INDEX 


Burrell, Col. Geo., chemist and nat. gaso- 
line producer 226, 251, 280. 
Burton, W. M. ex-pres., Standard Oil Co. 
of Ind. (cracking process) 107, 280, 346. 
Buyer of crude, world’s biggest 175. 
Byles, Axtell J., pres., Tidewater and T. 
Associated 330. 
C 


Cabin Creek, W. Va., (see Pure Oil Co.) 
2605 -oDa« : 

Cadman, Sir John 11. 

“Caesar’s Tax” by Benj. L. Dulaney 386. 

Caetani, Don Gelasio 61. 

Caleasieu parish, La., see Edgerley and 
Vinton pools 70, 1638, 166, 167. 

California’ 2;-5,016;- 21, 24, © 25,:28,-29, 31, 
33-35, 39, 40, 42-45, 51-58, 55, 57, 59, 66, 
69-73, 75, 77-81, 86, 88-90, 92, 96-7, 100, 
105s 10S plore ibs IV Silo abo elo 
US hele Sel 39, 142 145 0-060, 208 
(comparisons) 220-1, 231-3; fuel oil dis- 
tribution (map) 153; 233, 2438, 254, 302-3, 
305, 365 (see Los Angeles and oil fields). 

Calif. Institute of Technology 291. 

Calif. Mining Bureau 40. 

Camels in asphalt, Rancho LaBrea 5, 29. 

Canada 15, 28, 38, 538, 63, 130, 302. 

Canadian Bureau of Statistics 302. 

Canal, see Panama. : 
Capacity, 8-inch pipe line 54; Mexican stor- 
age 233; reservoirs 80; steel tanks 52. 
Capital assets, companies 303-4; divisions 

303; industry’s total 303,358. ; 

Capital, at various times 356; comparisons 
357; method of procural 858; new, need- 
ed per annum 305-6, 357-8; outlay, an- 
nual 306; returnable as depletion 321; 
total invested 302, 357; unreturned, crude 
business 305. 

Cap rock, see impervious beds 23. 

Cartagena and Mamonal, Columbia 217-8. 

Carter, Col. J. J. 68; county 160. 

Cash ten independents, 348. 

Casiano Mexican gusher 229-231. 

Casing 49, 51; cost of, 309. 

Casinghead gasoline 109, 158. 

Casper, Wyo., 135, 139, 170. 

Cementing wells 41. 

Center of production, U. S. 136, 157. 

Central America 207. 

Cerro Azul, gusher 229-30, 300. 

Chamber of Commerce, U. S., 181, 195; 
ex-pres. Julius H. Barnes 20; committee 
on business ethics 272; ex-pres. R. F. 
Grant 328; charts 180, 182, 185. 

Chamber of Mines & Oil, Calif. 34, 79 
(see Oil Bulletin, cred. with data and 
illustrations). 

Character of oil men 274, 284. 

Characteristics of crude 22; see Quality. 

Cheapness of gasoline 114-117. | 

Chemically controlled industry 84. 

Chemistry 22, 57-9, 107, 369. 

Chemists 57, 59, 119, 280, 282; see Bjer- 
regaard, Burrell, Burton, Leslie, Little, 
Loomis, Rittman, Slosson, Stowell, Wil- 
son. 

Chester concession 10. 

Chief products 59, 60, 82, 83, 86 ;—sources 
of U. S. imports of crude 200. 

Chili, chief So. Am. coal producer 208. 

China 15, 182-4, 186, 191-2. 

Cities and oil towns 20, 63-4, 135, 1388-9; 
capital of oildom 136-8; import traffic 
139; refining centers 139, 168-170; see 
also Amarillo, Bakersfield, Bartlesville, 
Bayonne, Baytown, Beaumont, Bradford, 
Burkburnett, Cabin Creek, Casper, Cleve- 
land, Corsicana, Destrehan, El Dorado 
(Ark.), Eldorado (Kans.), Fall River 
90, 170; Fullerton, Ft. Worth, Galveston 
139, Houston 135, 138; Lima 138, Long 


Beach, Los Angeles, Luling, Marcus 
Hook (Phila. district), New Orleans, New. 
York, Olean 355, Parkersburg 138, Pauls- 
boro 355; Pawhuska, Philadelphia, Pitts- 
burgh, Port Arthur, San Diego, San 
Pedro, Seattle 17, Shreveport 138, Tam- 
pico, Titusville, Toledo, Tulsa, Washing- 
ton, Wichita 138, Wichita Falls 135, 138, 
Wood River 139. 

Cities Service (Doherty interest) 367; (see 
Crew-Levick and Empire Gas & Fuel). 

Clapp, Fred’k G. 254, 281. 

Clark, E. W., v.-pres., Union Oil Co. of 
Calif., 112, 349; pres. (1927), Am. Pet. 
Inst. 300. 

Coal, Army mines, Philippines 43, 44; 
Association with oil 26, 99; Canada 38; 
carbon ratio 26; compared with oil 97; 
discovered in oil drilling 30; industry 
overcapitalized 42; origin of, 30; Pitts- 
burgh seam 30. 

Coalinga, Calif. 154, 156, 160. 

Colombia, American capital 217; 90 per- 
cent of So. America’s coal 208; coming 
important oil producer 214; development, 
Baranca-Bermeja_ district 215-7; im- 
mense mineral wealth 217-9. 

Colorado 36, 148, 150, 170, 340. 

Comar Oil Co. 351-2. 

Commerce 171-200; see Exports, Imports, 
Oil ports, Trade. 

Commerce Reports, U. S. see Dept. of Com., 
Bur. of Dom. & For. Com. 

Comodoro Rivadavia 202, 210, 211, 212. 

Companies, assets 303-4; bond liabilities 
361-2; capital 844; current assets, ratio 
to current liabilities 364-5; dividends 
337-8, 340, 343, 367; earnings, net 335-6, 
367; gross income 334-5; inventories 
(mdse) 346, 348; mergers 329-31; net 
profits 335, 167; securities 361-4, (listed, 
7 bil. dollars) 865; tankers 345; who’s 
who 3038, 335, 367. 

Companies, Amerada Corp. 336. 337 (see 
Amerada Petroleum Co., DeGolyer, pres., 
276) Asiatic Petroleum 16; Associated 
330, 336; Atlantic Refining 304, 335-6, 
355; Barnsdall 11, 304, 329, 336; Cali- 
fornia Petroleum 304, 335-7, 367; Carter 
316 (see Standard, N. J.), Chanslor- 
Canfield 310; Comar 351-2; Continental 
116, 304; Crew-Levick 356; Dixie (Stan- 
dard, Ind.) 819; Empire Gas & Fuel 
304, 3806, 348, 3867; Galena-Signal 364; 
Gen’! Petroleum 105, 304, 329, 335-6; 
Gulf Oil Corp. see gen. index; Houston 
Oil 336, 362; Humble see gen’l index; 
Imperial Ltd. 213, 217; Independent Oil 
& Gas 364; Lago Petroleum 351 see also 
Pan Am. P. & T. Co. and Venezuela; 
Magnolia 359 see Standard, N. Y.; Mar- 
land 304, 3864-5, 367; Mid Continent 
(formerly Cosden) 3804, 335, 362, 364; 
Midland 310; Mountain Producers 335, 
865; Ohio Oil 304, 335, 346, 367; Pacific 
Oil 329-30; Pan American Petrol. & 
Transp. see gen’l index; Phillips Petro- 
leum 304, 335-7, 354, 361-2, 367; Pan 
Am. Western 304, 351, 365; Prairie Oil 
& Gas 304, 324, 335-8, 364, 367; Prairie 
Pipe Line 304, 364; Producers & Re- 
finers 304; Pure Oil 267, 304, 352, 364; 
Salt Creek Producers 336, 365; Seneca 
63; Shell Union 804, 335-7348, 350, 364-5, 
3867; Simms 3836, 364-5; Sinclair 304, 
835-7, 3848, 361-2, 365, 367: Skelly 304, 
336, 362-5; South Penn 337, 365; Stan- 
dard, Calif., 115-6, 118, 303-4, 328-30, 
333, 335-8, 346, 362, 367; Standard, Ind. 
116, 304, 335-8, 343-6, 364, 367; Standard 
Kan. 116; Standard, Ky. 304, 335-8, 364, 
367; Standard, La. 116; Standard, Neb. 
116, 335; Stand., N. J. 3804, 3385-8, 346, 


INDEX 


364 (see Humble) ; Stand., N. Y. 116, 304, 
331, 335-8, 362, 364, 367; Stand., Ohio 
304, 335-8, 367; Sun Oil 304, 335-7, 353, 
355, 362; Texas Pacific Coal & Oil 164, 
331; The Texas Co. (see gen’l index) ; 
Tidewater 69, 304, 329-31; 335-7 367; 
Transcontinental Oil 217, 304, 336; 
Transcontinental Petroleum 345 (see 
Standard, N. J.); Union Oil of Calif. 
349-50 (see gen’l index); Vacuum 334-8, 
357, 364-5, 367; Ventura Consol. 294; 
White Eagle 336. 

Comparative growth 66; income 332; 
prices 114, 115-7. 

Comparisons, Calif., Okla., Texas 168; 
Mexico with Ark., Calif. and Gulf Coast 
233: natural gasoline production 158; 
producing countries with states 1924- 
1926, 147; trade in leading commodities 
WG 61 19. 

Competition, Calif. vs. East 78, 365. 

Competitive drilling 68, 79, 246, 306; pro- 
duction uneconomic 91, 100, 264. 

Concentration, Mexican oil 225, 237; min- 
eral production 167. 

Confiscation threatened 244. 

Congress 78, 91, (Cameron bill) 246. 

Conservation 5, 40-3, 66, 79, 97, 99, 101-2, 
105-6, 121-6; accomplished and required 
259; Board 261 and its first report 264; 
encouraged by good prices 317; through 
combinations 329. 

Consulting engineers 250. 

Consumption, crude oil 93-4, 322-3; gaso- 
line 111, 113, 129-30, 318, 323; per motor 
vehicle 110-11, (map) 323; refined prod- 
ucts U. S. 323, 366; world 191-2. 

Control of prices, flush producers 75. 

Coolidge, Calvin 127, 245, 261. 

Cope, H. W., asst. dir. eng. Westinghouse 
309. 

Copper, Latin America 193; value, UALS: 
63 


Core drilling 43-9; cost 311. 

Corsicana Deep Well Drilling Co. 165. 

Cosgrove, J. J., atty., The Texas Co. Sale 

Cost factors 306, 314. 

Costs, cable drilling 312-4; core drilling 
311; development 312-4; equipment and 
supplies 308, 312; labor and manage- 
ment 307, 312-3; leases 316; leasing 310; 
lifting or pumping 314; producing 306, 
314-6; reduction 378; refining 85; rotary 
drilling 312-4; transportation 85-90; 
varies with yield rate 315. 

Cotton and corn, tonnage comparison 61. 

Cottrell dehydration 52. 

Counties; see Carter 160, Creek, Harris, 
Hutchinson, Jefferson, Kern, Los An- 
geles, Limestone 165, McKean, Natrona, 
Navarro, Orange 33, Osage, Ouachita 
Smackover f.), Reagan, Seminole, Yen- 
ango, Wichita and Wilbarger 164; also 
maps 145, 149, 159, 163, and table 168. 

Cowdray, Lord 228, 278. 

Cracking process 57, (Burton) 107, 280, 
346; (Dubbs) 334, 352; (Holmes-Man- 
ley) 340. 

Crawford, Geo. W. (Transcontinental Oil) 
Dis 

Creek County 42, 88, 160; see Cushing. 

Cretaceous 26, 27, 28, 200-1, 231. 

Crew-Levick Co. (Cities Service) 356. 

Cromwell pool 142, 144, 161. 

Crude oil, making money out of 324; stocks 
81, 82, (supply and demand) 318, 367 
see consumption, exports, imports, pro- 

- duction. 

Cuba, richer in ore than in oil 205. 

Curacao, Dutch West Indies 207. 

Current assets (cash and mdse) 341, 346, 
848; ratio to cur. liabilities 359; less 
current liabilities (working capital) 343. 


Current production, see production; supply 
and demand 322-3; 3 sources, cur. sup- 
ply 322. 

Currie, Sir James T. 222. 

Curtis Publishing Co. 297; see Sat. Eve. 
Post. 

Curzon, Lord 17. 

Cushing, light oil district 33, 42, (output 
to 1925) 161; cementing 41; life of, 
69, 78, 88, 142-3. 

Cuts or fractions in refining 54. 


D 


Daily rate 16, 68, 69, 71, 86, 94, 105, 142-3, 
146, 148, 155-6, 158, 170, 217, 222, 230-1; 
peak, 1926, 1927, 368-9. 

Darnell, Jas. L., val. engr. 71, 318. 

Davis, Dwight, Sec’y of War 130. 

Davis, Edgar B. of Mass., founder, United 
No. & So. Oil Co., Luling, Tex., 166, 277. 

Davis, James J., Sec’y of Labor, 49. 

Davis, W. N., pres., Mid Cont. Oil & Gas 
Assn., 92; 298 (Phillips Petrol. Co.) 354. 

Davison, Geo. S., pres., Gulf Refining and 
(1926) Am. Soc. Civil Engrs., 130, 267, 
283, 298. 

Dawes, B. G., chairman; H. M., pres., 
Pure Oil Co., Chicago, IIll., 352. 

Day, David T., late geologist, author, 
“Day’s Handbook” 43 ;—Roland B., ‘‘In- 
creasing Income,’’ 335. 

Deans of geologists, 65, 281. 

Death rate, accidents, 284. 

Decrease 30 mil., Calif. output 142; U. S. 
output 1924, first since 1906, 144. 

Deep drilling, 30, 48; 51,° 73, 156, 307. 

Defense, national, 130; industry 117. 

Deficits (under Net income) 334; dividends 
from, see Depletion 319 (Boston News 
Bur., Aug. 20, 1926). : 

DeGolyer, E. L., geologist, pres., Amerada 
Corp. and Am. Inst. Min. & Met. Engrs., 
2A mo Ogecol. 

Dehydration 52. Demand, see consumption. 

Denmark, 180, 182, 185, 186. 

Dennison, C. S., globe-trotter, Texas Co., 
338. 

Departments, ~U. S. Government—AGRI- 
CULTURE, 119; COMMERCE, Bureau 
of Census 82, Navigation 90, Standards 
101, Bureaus of For. & Dom. Com. and 
Mines 248-51, 252; INTERIOR, cosmopo- 
litan character Bur. of Education 127; 
Indian Office 6, 41, 252, 257; Land Of- 
fice 252; See also Geological Survey ; 
JUSTICE, Attorney General 106; LABOR 
49-57, 313 (see James J. Davis); NAVY, 
95, 130; buying and storing supplies 257 ; 
increasing call for liquid fuel 257 ; under- 
ground reserves 245, 259; POST OFFICE 
(Harry S. New, P. M. Gen’l) 106; 
STATE 12, (ex-Economic Adviser, S. K. 
Hornbeck) 19; TREASURY, Bur. Int. 
Revenue 248, 31, 71, 226, 316, ‘“‘Statis- 
tics of Income” 325, 333 valuation engi- 
neers 31, 71, (Natural Resources divis- 
ion) 6; WAR (U. S. Army coal mines 
and corps of Engrs.) 438, 44, (Sec’y 
Davis) 130, Army trucks 257. See also 
Federal Oil Conservation Board, Fed. 
Trade Commission, Fuel Administration, 
Nat’l Museum, Shipping Board, and Su- 
preme Court. 

Depletion of natural resources 19, 101, 136, 
806, 3821; deduction before income tax 
321; latest laws, 1924 and 1926, 322. 

Depreciation, physical assets 306, 312. 

Depth, drilling 40, 68; production 72-8, 
rege ee ae producing sands, major fields 

Desert drilling 64; filling station 92. 

Destrehan, La., refinery, Pan Am. 170. 


INDEX 


Deterding, Sir Henry W. A., man. dir., 
Royal Dutch, dir., Shell T. & T. Co., 
chairman, Shell-Union Oil Corp. 350, 
369. 

Determination of net profit 334. 

Diesel engine 17, 65, 95, 102, 242. 

Discount for risks and time 377. 

Distress prices 75, 78, 90. 

Dividends 338, 344; from deficits 321; more 
regular 337; Standard totals 338, 368; 
Texas Co. 340. 

Divisions of the industry, Finding and de- 
veloping 438-51, 67-68, costs 311-3; Pro- 
ducing 51-2, 68-74, 303, costs 312-14, in- 
come 3832-3. Transporting 51-54, 98-90, 
(storing) 80-81; 308; Refining 54-60, 82- 
86, 303, 335, 378; Marketing 91-99, 113- 
118. 

Dixie Oil Co. 161; see Standard of Ind. 

Doheny, Edward L. 228, 292, 310; brought 
billions to surface 278; California on 
oil map 291; Cerro Azul 230, 300; estab- 
lished Mexican industry 227; supreme 
knowledge 276; ‘‘Martyr we made you” 
173; Mex. fuel oil in war (Arnold) 299; 
Naval Reserve 247; Peruvian pioneering 
213; pre-eminent pioneer 278; war oil 
committee 298; world’s foremost wild- 
catter 278-9. 

Doherty, Henry L., chairman, Cities Serv- 
ice Co., advocate, unit. plan 130; 299, 306, 
326. 

Darnell, J. C. late pres., Ohio Oil Co. 271. 

Dome oil structure 24. 

Domestic doings in 1926, 326, 368. 

Domestic production, exportation 136-187. 

Dominence, United States 15, 233. 

Dos Bocas, Mexican gusher 228. 

Drake, ‘‘Colonel’” E. L. and first well 63, 
101. 

Dralle, N. E., Engr., Westinghouse 309. 

Drilling costs 310-12; methods, cable 30, 
49-50; core 44, 46-9; rotary 41, 44, 50, 68. 

Dry-hole hazard 244, 306; dry holes, num- 
ber 311. 

Dubious attitude, Latin America 10, 202. 

Dumble, E. T., dean Western geologists 
281. 

Dutch East India 14, 15, 18, 103, 191, 192. 

Dynamiting eastern markets 78. 


E 


Earmarks of -fraud 381. 

Earnings, gross 334; sales 336; net, 334-5; 
companies (profits) 337, 367. 

Eastern states 146. 

East India, see Dutch E. I. and India. 

Eaton, J. E., geologist, 328. 

Economic geology 14, 22-301, 200-2, 225. 

Economics 61-128; 6 fact groups 68. 

Economic limits 69-70; evolution, Calif. 
154. : 

Ecuador 208. 

Edgar, Sir E. Mackay, chairman, British 
Controlled Oilfields 18. 

Educating gullibles, great safeguard 370. 

Efficiency of industry 40, 61-2; employes 
273. 

Electra and E. district 142, 164. 

Electric drilling cheaper 309. 

Electrification, field and refinery 309. 

Elements, cost, comprehensive 306. 

Elk Hills, Calif., 155-6, 258-9. 

Emmons, W. H., ‘‘Geology of Petroleum”’ 
23. 

Empire Refineries 280. See Empire Gas & 
Fuel Co. under Companies. 

Engineering aspects 40-43; conservation 
through 101. 

Engineers, Geo. S. Davison 130, 283; diplo- 
mats 11; Gov’t as 245; production 42, 
valuation 31. 


England, modern tanker built 88 (see 
Brit.) 

Enterprise, U. S. in South America 194. 

Eocene, a Tertiary spoch 27. 

Equipment and supplies, standardization 
66, 307. 

Europe and European countries 14, 16, 17, 
19, 141, 147, 195-6. 

Expenditures, annual, 306. 

Expense, see cost; sources 314. 

Exploration 22, 30, 43-49, 253. 

Exportation not depletion 187. 

Exporter, U. S. the leading 179. 

Exports, by classes 179, 3869; distribution 
180, 182-7, (non-oil) 196; position of 
petroleum 178-9; 24 leading 179; rela- 
tion to production 186; tonnage of 10 
exports 174. 


' Export trade, Federal restrictions 178; im- 


portance of maintaining 177-8; Mexican 
238-40; oil greatest force 177; patiently 
built up 178. 

Export. traffic of oil ports 139. 

“Evolution of the Oil Industry’”’ 301, 305. 


Fact finding 376. 

Factors, cost (elements) 305-6; economic 
68 ; equipment and supplies variable 312; 
human 272; in rapid finding and develop- 
ing 105. 

Failures, causes 374-6; prevention 376-8. 

Fall River, Mass. 90, 170. 

Fanning, L. M. 154, 806; N: O. 67, 88; 
154, 357-8. 

Farish, W. S., pres., (1926) Am. Pet. 
Inst., pres. Humble Oil & Rfg. 105, 130, 
369. 

Farmers 20, 301; farm labor diversion 63. 

Fatalities 284-5, 367. 

Fath, A. E., chief geologist, Vacuum Oil 
281. 

Fay, Albert H., val. engr., (head, Natural 
Resources division, 1921-3) 31, 49. 

Federal, see Governmental; bureaus, see 
Departments, Geol. Survey, Mines; Gov- 
ernment greatest single consumer 245; 
Oil Conserv. Board 261, report of Trade 
Pommlanionse 65, 78, 85, 91, 92, 108, 104, 

Federal Council, Churches of Christ 98. 

Fee ownership 20, 123, 359. 

Fields, major American 31, 141; see Oil 
fields. 

Fifteen best customers 196. 

Financial, bird’s eye view 301; deficit, crude 
industry 4% billion, 303; influence and 
integrity 3802; losses and conservation 
324-9; position, Gulf and Humble 348; 
problem of storage 323-367; stabilizing; 
storage function 81, 324; success essential 
301; treasures and tragedies 305. 

Financial World 103. 

Financing the industry 356; capital in- 
vested, comparisons 357; current. re- 
quirements 356; expansion 356; how done 
357; increase in capital of companies 
358; sudden need for new capital 356; 
surplus, treble purpose 358. 

Financial policy, raising capital, 356; re- 
arrangement, largest 368. 

Fire losses and prevention 327-8. 

First tanker of Colombian crude 172. 

Fisher, Cassius A., 2638, 281. 

Flooding or water drive 43, 72, 367. 

Flush vs. settled production (ratio) 69, 
266. 

Fohs, F. Julius, ex-chairman Petrol. Sec. 
and Vice Pres. Am. Inst. Min. & Met. 
Engrs. 70, 145, 163, 164, 165, 166, 168, 
277, 281, 310, 324. 

Folsom, D. M., Gen’l Petrol Corp. 154. 

Food from petroleum 59. 


INDEX 


Ford, Henry, 290 inventor, with business 
ability 278; on fraud prevention 370. 
Foreign bottoms, American exports in 172. 
Foreign and Domestic Commerce, U. S. 12, 
te. Gt 68, 101) 2120... 1625191, “196s 177, 
194; see Dept. of Com. or Com. Reports. 

Foreign commerce, leading nations 195, U. 
S. tonnage 174; U. S. Value, imports 
176, exports, 179, by countries 196; min- 
eral oil 175-187. See Bur. of Dom. and 
For. Com., exports, etc. 

Foreign comsumption 15, 129-30, 191, 192; 
nation’s efforts to find oil 16-17; produc- 
tion 14, 19, 140-1, (1926) 147. See also 
World consumption, ete. 

Foreign ownership, U. S. oil 103. 

Forms of assets 302-3. 

Fortunes, service of 278. 

Fox, Homer S. 184, 191, 249, 368. 

France 8, 10, 14, 15, 16, 43, 119, 184-6. 

Friendly competitors, Wortham Tex. 277. 

Fraud evil arousing wrath 370; perpetra- 
tion 370-9; prevention 380-3; punish- 
ment 106. 

Fuel administration, see Requa 76. 

Fuel and power, cost factors 309. 

Fuel oil, California 153; comparison with 
coal 97; largest fuel oil contract 368; 
prices -93, 97; recovery from crude 60, 
85, 86; stocks 82, 366; utilization 96. 
See Gulf coast and Mexico. 

Fullerton, Calif. 35, 155, 265. 

Furnace oil, growth in use 99, 368. 

G 

Galicia (see Poland) 14, 19, 140-1, 147. 

Garber pool 78, 142, 366. 

- Garfias, Valentin R., megr., foreign oil 
dept., Cities Serviee Co., 147, 281. 

Gas, see Oil & Gas fields, Natural gas, W. 
Va. 

Gasoline, casinghead 60, 109, 158, 360; 
change in demand 84, complete com- 
bustion 122; cracking process 57, 60, 
107, 270, 367; criterion of quality 107; 
demand and supply, 111, 367, 113; dis- 
tillation range 59, 106, 124; economic 
factors 126; exports 109, 179, 180, 184 
(fig.) 323, 367; marketing 115-6; mileage 
per gallon 125; prices 114, 116-7, 366-7; 
profitable production of natural g. 360; 
raising boiling point 124; recovery in- 
creasing 60, 85, 86, 110, 366 (see Stand- 
ard of Ind. and The Texas Co.); relief 
train 112; sources 107, 366; war rela- 
tions 59. 

Geographic center of production 136; g. 
sources of production 142-147, 361; dis- 
tribution of reserves 19, 39, of invested 
capital 301, 302, of The Texas Co’s oper- 
ations 339, Standard of Ind. 344-5, of 
Standard Oil markets 116; significance 
of Calif. fuel oil, 153. 

Geographic range, drilling costs 313; grav- 
ity 142. 

Geography, commercial, chapters VIII, IX, 
X; physical, chapter III; see Maps. 
Geologic column, U. S. G. S. 27; distribu- 
tion 26; science essential 40, 310 and 

inexpensive $10. 

Geological distribution 26-28. 

Geology, commercial 31-38; economic 22-30; 
historical and stratigraphic 26-28; gene- 
tic 22-23; structural 23-24, 225; Latin 
American 200-2. 

Geological Survey 6, 12, 22, 25-7, 29, 31, 34, 
39, 55, 63, 76, 82, 98, 94, 101, (G. E. Mit- 
chell 6, 121), 251-5, (graduates) 281. 

Geological work inexpensive 310. 

Geologists, see Arnold, Bain, Beal, Bran- 
ner, Brown, Clapp, Day, DeGolyer, Deu- 
sen (281), Dumble, Emmons, Fath, 


Fisher, Fohs, Folsom, Heald, Hopkins, 
Jensen, Jester, Johnson (Huntley & Som- 
ers), Knapp, McCallom 280, McLaugh- 
lin 280, Marsters, Morris, Orcutt, Red- 
field, Richardson, Smith, Taff 281, Udden, 
Veatch, Washburne 281, Wegeman 281, 
White, Wrother, Ziegler, Hill. 

George, H. C., Petrol. Dept., Okla. Univ. 
309, 314. 

Germany 14, 17, 141, 180-6, 191, 195, 196, 

Glennpool 33, 158, 160, 161. 

Gorgas, Gen’! 194. 

Governmental activities beneficial 246; 
assets 259, 260; benefits 2, 5, 6, 7, 9, 
246, 249; bureaus see Departments, Bur. 
of Mines, Geol. Survey; cosmopolitan 
character of work 245, 251; conservation 
of capital 41, 250; contributions (com. 
Dept.) 248-9; discoveries, surveys 252-4; 
economics 61, 62, 93, 101, 247, 257, 260; 
income 19, 247-8; needs and the Navy 
256-9; position on mergers 329; regula- 
tions 245-6; treasures vs. tragedies 247. 

Government, U. S. consumer. 95, 245, 257; 
consulting engineers 245; factor 245; 
-guardian 252, 260; helped by oil 247; 
land owner 245, 260; operator 245; pub- 
lisher 245 (see footnotes referring to the 
“Manual for the Oil and Gas Industry” 
and other publications); statistician 15, 
60, 63, 65, 76," 81; 83, -85,- 90; 94; 109; 
111, 140-2, 147-150, 157-8, 170-2, 174-6, 
179, 181, 183-4, 186, 191, 195-6, 198-9, 
etc.; tanker owner 171, 256. 

storie R. F., pres. U. S. Cham. of Com. 

Great Britain 8, 10, 11, 187-191, 368; see 
also United Kingdom. 

Great gasoline marketer 344. 

Greatest buyer 245; companies (‘‘Who’s 
Who’’) 303-4; depths 30, 309, 367; natu- 
ral gasoline producer 354; wells 41, 151, 
230. 

Gross income, 317, 332; how to increase 
833; twelve companies 335; The Texas 
Co. 340. 

Growth, capital invested 357; crude pro- 
duction 66-7, (fig.) 140, 146; crude de- 
mand 94, 322-3; gasoline 109, 1138, 323; 
Gulf Oil 346-7; refining 83; The Texas 
Co. 339. 

Guffey, J. M., Petroleum Co. 346. 

Gulf Coast 31, 36, 39, 41, 44, 70, 76-7, 
162-4, 166-7, 366, 368. 

Gulf Oil Corporation 41, 130, 137, 346-8, 
361-2, 364-5, 867; comparisons with 3 
other companies 343-4; thrifty 302. See 
Davison, Gulf Refining, Gulf production 
and Mellon. 

Gulf Production 167, 310; Refining 267. 

Gullibles need education 370. 

Gypsy Oil Co. see Gulf Oil Corp. 


H 


Haig, Robt., v. pres., Sun Shipbuilding & 
Dry Dock (see Sun Oil Co.) 178. 

Hammond, John Hays, see below and Mex. 
Seaboard (controlling Internat’! Petrol. 
Co.) 

Hammond’s Ten Dont’s 382. 

Harris County, Tex. 162, 164, 166. 

Harvard University Committee 294, Econo- 
mic Research 368. 

Hazards, dry hole 244, 306; life, limb 284. 
See also Risks, chap. XIV. 

Bealds K. C., staff geol., Gulf Oil 438, 254, 
81. 

Heating with oil 95, 99, 368 
mental 257. 

ES Aas 30, 251, (Petrolia) 164, (Burrell) 

High bonus, cost booster 306, 310-1, 315-6. 

Highest oil field in world 212. 


; - Govern- 


INDEX 


“High-grade pools, see Bradford, Burbank, 
~ Cushing, Glenn, .Powell, Seminole, Ton- 
~kawa. 

“Hild electric drive 310. 

‘History—Ark. 146, 149; Calif. 77, 146, 151, 

' 156; eastern states 63-65, 76, 145-6, 159; 

‘Seeonomic, U. S., 63-7, 81, 84, 97-90, 92, 
94, 96, 103, 109, 139-37 174; Gulf coast 
36, 41, 162, 167, 320, (Spindle Top) 367; 
imports 174; Kansas 146; Louisiana 146; 
Mexico 227-30, 234, 236, (Tampico) 240; 
Okla. 32, 42, 146,.158-61; (Seminole) 366, 
867; Pa. 63-4, 76, 145-6; Rocky Mts. 37, 
69, 146, 349; tanker transportation 88- 
90, 172, 365; Texas 145, 146, 162-7, 366-7; 
three phases 270; West Va. 159. See 

“ also Gulf Oil, The Texas Co., etc. 

Holland, see Netherlands. ; 

Holmes, R. C., pres., The Texas Co., 238, 
288, 3842, 348; Holmes-Manley process 
340. 

Hood, O. P., chief mech. engr., Bur. Mines 
99. 

Hoover, H. C., 12, 245, 248,° 261. 

Hopkins, E. B., (and Miss Jones) 220, 
yal Sen kes 

House organs of companies 136, 288. 

“How to Run a Service Station’’ 361. 

Hughes, Chas. E., ex-See’y of State 173, 
282. 

Human beneficiaries 293-7; annuities 287; 
big operators care for employes 285-7; 
institutions endowed 5, 291, 292, 296; 
employee stockholders 288; Farmer big- 
gest beneficiary 122, 293; housing 286; 
mutual treasures 288; Osage Indians 
294; service of fortunes 290; sick bene- 
fits 287; widening ownership 294. 

Human factors 272; characteristics of oil 
clan 274; correct conception, directors’ 
burden 297; directors as dept. managers 
296; driller, despot of the derrick 283; 
engineer and human element 288; fortune 
or failure 284; four able attorneys 282; 
geologist observe 280; hazards and _ he- 
roes 284; high-minded men 297; indus- 
trial representation 287; intensive, not 
extensive 83, 272; ladders to leadership 
281; labor troubles rare 273; lawyer- 
leaders 282; long lives of oil men 291; 
Mellon millions benefit householders 292; 
men who find through trained mind Dione 
neither nepotism nor politics 296; pion- 
eers’ supreme knowledge 276, preeminent 
ploneer in discovery 278; qualities of oil 
clan 274; reasons for high salaries 297; 
Stewart, Lyman, frontispiece, Part 1; 
stock ownership, employe 288; toilers in- 
telligent 273; treasures 288, 293; war 
work of oil men 297. 

Humble Oil & Ffg. Co. 105, 180, (school) 
287, 304, 328, 335, 336, 338, 343-4, (as- 
sets and securities) 346, 347-8, (Bay- 


town refinery), 348, 361-2, 364.- See also. 


W. S. Farish and Standard of N. J. 
Humor, Osage Indian 295; other 60, 105, 
251, ete. 
Humphreys, Col. A. E. 70, 164, 165, 278. 
Huntington Beach 34, 155, 156. 
Hutchinson County, Tex. 33, 145, 366. 
Hydrogenation of coal, Dr. Bergius 368. 


I 


Ichthyol 30. 

Ignoramuses prey on petroleum 371. 

Ignorance increases cost 311. 

Illumination, priority 95; Asia 135. 

Illinois 24, 28, 38, 72, 141, 147-50. 

Imperial Oil Co., Itd. (of Can.) 213, con- 
trols Internat’] Petrol Co. Ltd. 213, 217 
(see Standard of N. J.) 


Imperial valley, Calif., 92. z) 

Importance, domestic industry 61, 301; for- 
eign sources 7, 12-13, 66, 263, 265; for- 
eign trade 177; geology and technology 
40-1, 276, 279-81; Mexican Oil 241-3; 
Mexico and the U. S. 233. 

Import traffic of oil ports 139, 175. 

Imports, gain in refined 176; position of 
. petroleum, tonnage 174, value 176; rise 
of rank, refined 177; sources, 200; where 
received 175. 

Income, companies 334-6; comparative 332; 
producing and refining 332-333; how to 
increase 333. See net earnings, gross 
82-3. , 

Income tax, large 346. 

Increasing gross income 33838; profits by 
greater recovery 42, 267. 

Increase in crude output 72, 365; in im- 
ports 174: preventable in cost 315. 

Independents, see 103 and tables 304, 335, 
343-4, 348, 367. See mergers, 329. 

India, British, 14, 18, 19, 184, 186, 191, 
192. 

Indiana 38, 148, 150, 302. 

Indiana, Standard Oil Co., 116, 282, 288-9, 
304 (Dixie Oil Co.) 319, 829, (gross) 
sales 335; net profits 335 and 367, per 
share 336; new world power 344-6. 

Inglewood, see oil fields and 366. 

Institute of Petrol, Technologists 328. 

Intercoastal traffic 20-21, 88-90, 154, 3865. 

Interloping 102, 105; boosts cost 311. 

Internat’] Derrick & Equip. Co. 213, 393. 

International problems 7-14, °28, 178, 197- 
200. : 

International Petroleum Co. 2138, 217, 345. 

Internat’] position of. Standard, Inc. 344. 

Interstate Commerce Commission 88, 256. 

Invasion of eastern markets 78, 153-4; 365. 

Inventions, see cracking, elec. drive, rotary. 

Inventories, crude and refined 81-2, 111, 
822, 348, 366; Gulf Oil 348; other inde- 
pendents 348; Standard Oil Cos. 346; The 
Texas Co. 341, 348. 

Investing 361; vs. speculating 362-3. 

Investments, states 301-2; divisions 303; 
companies 304; yearly 806; Mexico 243, 
244; pipe lines 88, 303. 

Iron ore, Cuba 205; exports and imports 
174, 175; quantity 61, value 63; pro- 
duction concentrated in 8 states 167. 

Italy, buyer of lubricants 186; value, ex- 
ports to, 186; per capita consumption 
191; Fiat car made at Milan 118. 


J 


James, H. G., 105, 376 (died, 1926). 

Japan, (and Formosa) consumption, per 
capita and total 15, 191; production 14, 
147; reserves 19, tankers 90; U. S. ex- 
ports to 180-6; world commerce 195. 

Jefferson county, Tex. 162, 168 (see Spin- 
dle top). 

Jensen, Jaseph, geologist 71. 

Jester, George C., geologist 300. 

Johnson, Huntley & Somers’ ‘‘Business of 
Oil Production” 312. 

Jones, Geo. H., chairman, Standard Oil Co. 
of N. J., comments, Oil Board’s report 
271, outlook for 1927, 369. 


K 


Kansas 24, 28, 38, 188, 144, 146-150, 157- 
160, 164, 170, 302, 314, 328. 

Kansas City. 30, 98; K. C. Test. Lab. 120, 

Kansas Osage Gas Co. 352. 

Katalla, Olaska, see page 25. __ 

Kay County Gas Co. 352 (see Marland). 

Kay-Noble Counties 160 see Tonkowa. 


INDEX 


-Kellogg, Hon. Frank B., ex-ambassador to 
Gr. Brit.; special counsel, U. S. Govt., 
Standard Oil Case, 1911; ex-Senator ; 
now Sec. of State 255. 

Kentucky 37, (Estil Coe.) 42, 146-150, 170, 
SO2mo2ee 

Kern County (more than Penns’y) 152, 

: 258. 

Kern River field, Calif. 33, 88, 155, 156, 
258. 

Kettering, B. F., Gen’! Motors Research 117. 

Keystone Drilling Co., Beaver Falls, Pa. 43. 


L 


Labor conservation 41; cost 307, 313; ef- 
ficiency 61, 272; intelligence 273; Latin 
American 202; qualities 274; troubles 
rare 273; turnover, refining 273. 

Laboratory, Bur. of Mines 249; Mellon 296. 

La Brea Rancho, Calif. 5, 28, 29. 

Ladders to leadership 281. 

Lago Oil & Transport Co. 346, 351; Petro- 
leum Co. 222-3 (see Pan.-Am. P. & T.) 
Lakes, Caddo, La. (see Caddo field) 149; 
Maracaibo Venez. 11, 215, 218, 220-3; 

Tamiahua, Vera Cruz, Mex. 225. 

Lakeview gusher 77, 151. 

Lamp, The, 81, 84, 90, 108-9, 118, 136, 151, 
They, Le CAE OPA 2s PALA yale 7-3 ti 
273-5, 296, 299, 316, 324, 359, 366. 

Lands, leases, wells, value of 303. 

Lane, Franklin K. 102, 297. 

Lapham, H. G., The Texas Co. 339, 342, 
369. 

Large fields or pools—see Amarillo, Brad- 
ford, Burbank, Coalinga, Cushing, Glenn, 
Humble, Huntington Beach, Hutchinson 
Co., Kern River, Long Beach, Mexia, 
Midway-Sunset, Monroe (gas) 149, 
Powell, Salt Creek, Santa Fe Springs, 
Seminole, Smackover 149, Sunburst (or 
Kevin-S.) 

Largest financial rearrangement 368. 

Largest individual operator 161. 

La Rosa field 11, 221, 223. 

Late facts 147, 278, 365-9. 

Latent resources, see Latin America, Re- 
serves, Supply and demand. 

Latin America 193-244, coal resources 204; 
dawn of oil 204; glory of Panama 193; 
geologic condition 200-2; highways 203; 
internal trade 198; iron ore 205; La 
Rosa 11, 221; labor relations 202; lead- 
ership 193; natural condition 200-2; not- 
able changes, U. S. trade 196; outlook 
205; position in U. S. trade 195-7; pro- 
duction of emeralds and platinum 217; 
three countries in world trade 195; 
treasures and tragedies, tales of, 193; U. 
S. dependence 198-9, enterprise 194, sales 
less than purchases 195. 

Latin American petroleum—characteristics 
202, 221, 233; convenient location of 
fields 10; domestic demand limited 203; 
early explorations 212-3, 227; financial 
control, American in Colombia 217, Mex- 
ico 236-9, Peru 213; British in Trinidad 
and Venez. 222; geology 202, 206, 207-8, 
211; production to end of 1924 205, in 
1924 and 1925 2238, and in 1926 147; pipe 
line, Colombia 217-8, 369; retarded open- 
ing of fields 204; U. S. imports 200, 
needing more 198-9. See also Argentina, 
Brazil, Cent. Am., etc. 

Law, new Mexican 244. 

Lawyers, leaders 282. 

Leadership, lack of 102-3, 115. 

Leading buyer 10, 245; consumer 191-2. 

Leading discoverer, see E. L. Doheny 278. 

Leading exporters, see Mexico and U. S. 

Leading fields and pools 142, 1438, 152, 155, 
866; states, 1926, 147. - 

Leafax 54, 59. 


Leasing outlay 310, 316. 

Lefevre, Arthur, editor, The Texaco Star, 
135, 338, 342, 358: 

Lightning protection 328. 

Lima-Indiana field 38, 141. 

Lima, Ohio, prod.-rfg. center 138. 

Limestone beds 238, 33, (Tamosopo) 202, 
225. 

Linde Air Products, see Helium 251. 

Lives, often long 291. 

Living costs higher without oil 301. 

Little, Arthur D. and R. E. Wilson 57. 

Locomotive firing, priority 95. 

London Times 290. 

Long Beach or Signal Hill 35, 51, 73, 155, 
156, 367. 

Loomis, N. E., ‘Refining Crude’ 57. 

Los Angeles 21, 29, 34-5, 53, 112, 135, 
138-9, 212, 241, 278, 291, 310. 

pono nreles basin 34, 35, 69, 70-1, 88, 156, 

2 


Los Angeles County 51; see also Calif., 
Dominguez, Inglewood, Long Beach, 
Montebello, Rosecrams, Santa Fe Springs, 
Seal Beach, Sherman or Salt Lake, Sig- 
nal Hill, Torrance. : 

Los Angeles Times 244. 

Loss in crude production, net over $60,- 
000,000 (1923) 74; $218,000,000 in one 
field 326. 

Losses, comparative in min’l industries 
326; economic, see waste 100, 253. 

Losses, financial 324-8; analysis of: 5 
sources 325; corrosion 250; evaporation 
326; indirect and purely financial 324; 
large from cigarettes and matches 328; 
least from fire and explosion 327; light- 
ning leading fire cause 327; most serious 
sources 326; relation, prices and conser- 
vation 325; smoking 328. 

Louisiana 147, 148, 150, 157-8, 170, ‘see 
Caddo, Cameron, Cassieu, Haynesville, 
Homer, Monroe, Shreveport. 

Lubricants 56-7; U. S. in world 181. 

Lubricating oil, exports, 180, 183; prices 
93; regeneration 102. 


‘Lucas, Capt. Anthony F. 41, 49. 


Lufkin, E. C., ex-chairman, Texas Co. 283. 
Luling, Tex. 135, 165-6, 277. 
Lynch, Robt. N., San F. Ch. of Com. 153. 


M 


McGraw-Hill Co., 168, 318. 

McIntyre, James, 116, 276. 

McClesky well, 164, 

McKean County, 145, 146. 

Major fields, U. S. Chap. III, 31; produc- 
tion, 141. 

Magazine of Wall Street, 246. 

Magnetic points about indusrty, 371. 

Making money in oil, 331, 359, 371; crude 
stocks (inventory appreciation), 324; 
fee ownership, 359; share ownership, 
361-3; producing nat. gasoline, 360-1; 
trading in leases, 373; wildcatting haz- 
ardous, 359, 378. 

Mammals, prehistoric, 29. 

Mamonal, see Cartagena. 

Manning, Van H., ex-dir., Bur, Mines, 120. 

Manual for Oil & Gas Industry, 31, 71; 
see valuation and depletion, 317-320. 

Manufacturing and mfrs., 82, 308, 332. 

Maps, Argentine, 211; Ark. and La., 149; 
Calif., 35, 153, 258; Colombia, 215, 218; 
Louisiana (nor.), 149; Pacifie States, 
153; Pa., 145; Standard Oil marketing 
territory, U. S., 116; Texas, 163; Trin- 
idad, 200; U. S. major fields, 31; Vene- 
zuela; eastern, 200; Lake Maracaibo 
basin, 215; W. Va., 159; World reserves, 
18; consumption and_ production, 192; 
world distribution, U. S. exports, 180, 
182, 185. 


INDEX 


Marcus Hook, see Phila. and Refineries. 

Maracaibo Basin, 11, 201, 215, 220-223. 

Marcosson, I. F., author, ‘““Black Golconda,” 
244, 252, 295, 387. 

Maritime trade, U. S., 171-187. 

Marketing, concentration of, 115; staff of 
an- Am. company, Calif., China, 335; 
Jamaica, 199; So. Africa, 190. 

Market, control of, 103; retail, 332. 

Marland, E. W., founder, Marland Oil Co., 
305; marvelous record of company, 352; 
gross and net income, 3385, 367, see 281 
and 303 (Who’s Who). 

Marsters, V. E., 212, 279. 

Marvelous manifestations of wells, 231. 

Maryland refineries, 170; see Baltimore. 

Massachusetts, 170; see Boston; Fall 
River, 90. 

Mellon family, see Gulf Oil Institute, 292, 
296; Mellon millions, 292; Andrew W. 
quoted, 178, 282; subsidiary, 108. 

Men of Titusville, 298; who find, 276; who 
toil, 272; quartette from Calif., 300. 

Merchant Marine, tankers, 171. 

Merchandise on hand, 341, 346, 348. 

Mergers conducive to conservation, 325; 
Associated-Tide Water, 330; Barnsdall- 
Waite Phillips, 329-30; few motives, 329; 
General Petroleum-Standard, N. _ Y., 
331-2; greatest grouping, 330; Magnolia, 
331; Pacific Oil, 330; Pan American, 
329, 344, 351. 

Mesopotamia, 10, 19 (in Kern County). 

Mex. Eagle sold to Royal Dutch-Shell, 290. 

Mexia, 24, 70, 164-166. 

Mexican oil fields, area and location, 225; 
British capital, 225-244, 228; Cacalilao, 
234, 235; compared with U. S. fields, 
231-233; diamond drilling, 13; daily 
yield diminishing, 234, 2386; finding 
major field, 229; geology, 225; ‘‘Golden 
Lane,” 225, 229, 240; history, 227-230; 
Isthmian zone, 225, 228f; marvelous de- 
velopment, 229-231; Minatitlan, see Isth- 
mian, Tehuantepec, 225, 228, 234f; Pan- 
uco® field; 2235,..:229. 2325 234-225 --239- 
(Cacalilalo ete.), 236; physical features, 
225; Tamosopo limestone, 225; two main 
districts, light and heavy, 225, 226, 229, 
234; volcanic neck, 227; wonder wells, 
229-231. 

Mexican oil industry, American entrepre- 
neurs, 227; C. A. Canfield, E. L. Doheny, 
227, 228; capital invested, 244; Ebano 
exploitation, 227; exports, 288-240; fam- 
ous fountains, 229-231; foreign, 237; 
gusher in Tierra Blanca, 239-231; his- 
tory, 227-230, 243; labor troubles, 202; 
Mexican Central Railway, 227; . Mex. 
Eagle Oil Co., 228-230; Mexican Petro- 
leum Co., 227; (Doheny), 229; (Cerro 
Azul), 230, 237, 238; (Huasteca), 239; 
new wells, 237; Pan American Petro- 
leum & Transport Co. (see Huasteca and 
Mex. Petroleum), 351; producers (com- 
panies), 237; production, by pools, 234; 
declining, 234, 236; railway relations, 
227, 244; revolutionary damages, 224; 
refining, 241; shippers, 239; Southern 
Pacific Ry. (East Coast Oil Co.), 229; 
storage capacity, 84 mil. bbls., 233; 
Tampico, 21, 135, 138, 139, 202, 225, 
239-240. 

Mexican petroleum, age of reservoir rocks, 
225, 233; asphalt, 57f, 227; gushers, 229- 
231, 287; gravity, 225; meaning to 
Americans, 24, 78, 241; to Mexico, 242; 
nationalization, 244; prices, 233, 24; 
quality, 225-226, 233; reserves, 236; 
threat to U. S. industry past, 236f; tem- 
perature high, 226; total output to 1927, 
205; U. S. biggest buyer, 240; ‘“Who’s 
Who,” 236; World War factor, 299. 


Mexican wells, average daily yield, 231, 
232; Casiano No. 7, 229-231; Cerro Azul 
No. 4, 230, , 300, ; Dos Boeas or 
San Diego No. 3, 228; extraordinary be- 
havior, 231; famous fountains (3), 229; 
long flowing period, 231; number of pro- 
ducing wells, 232; Potreo del Llano, 229- 
230; propellant not gas pressure, 231; 
pumpers rare at one time, 231; salt 
water invasion, 78, 234. 

Mexico, 8, 10, 18-16, 26, 28, 57f; U. S. 
imports from, 78, 104, 236f, 240; land of 
silver sisal hemp and heavy oil, 224; 
place in Latin Am. trade of U. S., 224; 
vast and varied wealth, 224. 

Michigan, 149f. 

Midway-Sunset field, 77, 34, 151, 155, 156, 
160, 258. 

Mineral industry (U. S.), 63; (place of 
petroleum by states), 149, 150, 152, 157. 

Mines, Bureau of (now in Dept. of Com.), 
5, 15, 40, 41, 55, 59, 60; 62, 82. 83. 
85, 99, 100, 101, 107 114, 121, 248. 

Mining Congress Journal, 121, 322, 329. 

Mining oil sands, 42, 43, 136. 

Mining and Metallurgy, A. I. M. E., 11, 
14-120. 

Mining Journal, London, 16. 

Mining & Oil Bul., now Oil Bulletin (Los 
Angeles), 79, Etc. 

Moffat dome, Colo., 340. 

Monopolistic control, lack of, 102-108, 105. 

Monopolized pools, Alamo, Mex., 234, 267; 
Cabin Creek, 267; Casiano, Cerro Azul, 
Chijol, and Ebano, 227, 230, 234, 267; 
Saratoga, Tex, 167; Moffat, Colo. (The 
Texas and Transcont. companies), 340; 
Rainbow Bend (Kans.), 267; Reagon 
Co., 267; Seal Beach, Calif. (Marland), 
155; Toteco-Cerro Azul (3 companies), 
238; Ventura (Associated, Shell, ete.), 
155; Wellington dome, Colo, (Union 

~ Oil), 349-50; Salt Creek, Wyo. (Midwest 
Refining in large part), 345. 

Monroe gas field, La., 149, 309. 

Montana, 28, 37, 69, 70, 78, 147, 148. 

Morris, H. C., Hoover’s ex-aide, 12, 68, 
177, 249. 

Most ‘‘refined’’ metropolis, 139. 

Motor fuels, see gasoline, chapter VII; 
book by E. H. Leslie, 119. 

Motorizing fishing fleet, 118. 

Movement, Pacific to Atlantic, 78-79, 365. 

Municipalities dependent on oil, 138. 

Mushroom operators, 79, 81, 102, 105. 

Mutual treasures, 288. 


N 


Naptha (as synonym of gasoline), 56. 

Natal, South Africa, 119, 190. 

National Bank of Commerce, 67. 

National Better Business Inc. (formerly 
National Vigilande Committee), 106, 
abe branches of, 384; questionnaire, 
83. 

Nationalization, 244-5. 

National Museum, bulletin, 75. 

Natural gas, 22, 63-4, 101, 158-9. 

Natural gasoline, 109, 158. 

Natural resources, see chapters II and 
III, 19, 39, 100-102, 31f (A. C. Bed- 
ford), Division of the I. T. U., U. S. 
Treasury, see chap. XI; also “Manual 
for the Oil & Gas Industry,” and valua- 
tion engineers, 

Natural treasures and tragedies, 28-29. 

Nature and. origin of oil, 22-23. 

Naval reserves, 258-9; vessels, priority of, 
95. 

Navarro County, Tex., see Corsicana and 
Powell, 164-5. 

Navy, British, 90 percent oil fired, 17; 
U. S., 95, 97, 251, 253, 256-9, 194. 


INDEX 


Neches River (Port Arthur), Tex., 170. 

Negroes as finders and lessors, 294. 

Net earnings, companies, 335-6; entire in- 
dustry, 333. 

Netherlands, 17. 

New Jersey, 170; see Bayonne. 

New production peaks, 140, 147. 

New world power in petroleum, 344. 

New York—oil port, 20, 139; refining cen- 
ter, 169 (N. J. side) ; state as producer, 
147-150; Stock Exchange. 

News summary for 1926, 368. 

Norway, 17, 118, 180, 182. 

Norwegian schooner ‘‘Maud,’’ 17; tankers, 


Noteworthy world events, 368. 
Number of stockholders, 294; wells in U. 
S., 148; in Mexico, 231, 232. 


O 


Occurrence of oil—geographic, 31-39; 
stratigraphic, 26-28; structural, 23-24. 

O’Donnell, Tom., pres. A. P. IL, 79. 

Oil Conservation Board and its first re- 
port, 261, 315. 

Oildom anticipated inquiries, 262. 

Oil Bulletin, Calif., 7, 73, 87, 110, 112, 
300, 328, 330-1. 

Oildom, a weekly, Bayonne, N. J., 277. 

Oil fields or pools of the United States 
(see also major fields), Amarillo or Tex- 
as Panhandle, 33, 145, 1638, 363; 
Archer Co., 166; Batson, 70, 166-7; 
Beaumont (see Spindle Top), 368; Big 
Lake, 142, 1638, 166; Bradford-Allegany 
Pa.-N. Y.), 72, 360; Bristol, 161; Bur- 
bank, 79, 160; Burkburnett, 62, 166; 
Caddo, La., 70, 149; Carson Co., 33; Cat 
Creek, 37, 70; Coalinga, 155; Coyote, 
155; Cromwell, 161; Cushing, 33, 41, 
42, 69, 78, 88, 161; Damon Mound, 70, 
167; Dropright & Drumright (Cushing), 
69; Edgerly, La., 70; El Dorado, Ark., 
149; Eldorado, Kan., ; Electra, 142, 
164; Fullerton, 155; Garber, 78; Glenn, 
161; Goose Creek, 166, 167; Gulf Coast, 
unspecified, 167, also 338, 36, 40, 41; 
Healdton, 70, 161; Hewitt, 161; Hull, 70, 
167; Humble, 70, 167; Huntington 
Beach, 34, 35, 71, 155, 156; Hutchison 
Co., 33, 145, 366; Inglewood, 155, 366; 
Jennings, 70, 167; Kern River, 70, 160; 
Long Beach (Signal Hill), 35, 71, 73, 
142, 155, 156, 366; Luling, 142, 166; 
Mexia, 70, 142, 166; Midway-Sunset 
(Kern Co.), 34, 77, 151, 142, 156; Mi- 
rando, 166; Montbello, 155; Orange, 167; 
Papoose or Wetumka, 161; Powell, 72, 
78, 165; Ranger-Eastland, 166; Rattle- 
snake, 155; Reagan Co., 267 (see Big 
Lake) ; Richfield, 155; Rosecrans, 155; 
Santa Fe Springs, 35, 51, 69, 100, 142, 
148, 145, 151, 155, 156, 366; Seminole, 
168, 866, 368; Seal Beach, 155, 352; 
Smackover, 80, 142, 149; Sour Lake, 70, 
167; South Liberty, 167; Spindle Top, 
36, 40, 76, 102, 167, 366; Sunburst, 37, 
69, 78, 368; Tonkawa, 32, 70, 160, 161; 
Torrance, 142, 155; Ventura Ave., 151, 
155; Vinton, 167; Watchorn, 161; West 
Columbia, 70, 167, 320; Wewoka, 161, 
319, 345, 359; Wortham, 148, 165, 277. 

Oil and Gas Journal, 12, 20, 34, see numer- 
ous footnotes. 

“Oil Industry’s Answers, The,” 177, 272, 
314. 

“Oil Industry,” by Lilley, 360. 

Oil men, Pennsylvania, 298. 

Oil, Paint and Drug Reporter, 28, 81, 102. 

Oil Trade (Journal), 54, 92, 107, 323. 

‘Oil Weekly, 36, 49, 98, 109, 117, 253, 287, 
320, 349. 

Oil, lake of 550 million barrels, 304. 

Oil ports, 20, 138-9. 


Oklahoma, ‘‘Heart of Mid-Continent,’’ 157- 
162; Burbank and Tonkawa, 160, see 
oil fields geology, 24, 28, 83; Glenn dis- 
covery, 158; producer of other min- 
erals, 157; Natural gasoline, 158; pro- 
ducer of other minerals, 157; prom- 
inent pools, 161; Seminole, 161, 367; 
summary, 161-162, 302; well costs, 312. 

Oldest active operator, 368; pumper, 146; 
tank builder, 275; well, Calif., 151. 

Operating costs, 306, 313-6, 

Orcutt, W. W., v.-pres., Union Oil, 281. 

Osage County or Nation, 160; financial im- 
portance, 311; Indians, 294-6. 

O’Shaughnessy’s ‘‘Venez. Oil Handbook,”’ 


Osborn, C. C., economist (ex-Marland), 


Outlook for Industry, W. C. Teagle, 106; 
Sir Deterding, 369; for 1927, 368; for 
Latin America, 205. 

Output of leading countries, 141, 147, see 
production and yield. 


P 


Pacifie Coast, 153, 172, 175. 

Pasvolsky, Leo, Bur. of Economics, 7. 

Panama, history, 193; seeking oil, 207; 
Canal, 20, 89, 90, 172. 

Pan American Petroleum & Transport Co. 
see under ‘“Companies’’—Huasteca, 258; 
Mexican Petroleum, 229, 236-7, 238, 304, 
335, 344, 351, 367, 

kan Amerisan republics, interdependenec, 

Pan American Union, W. A. Reed, trade 
adviser, 6, 204. 

Pan American Western, 304, 351, 367. 

Panhandle, Texas, 33, 145, 367 (see 
Hutchinson County). 

Paraquay, 211. 

Parker, Hon. Edwin B. (chairman, U. S. 
Ch. of Com., 1927), 272, 338. 

Participation, Standard Oil, 103. 

Par value (see net profits), 336. 

Pawhuska, Okla. (see Osages). 

Pearson, P. H., “Surface Signs, Oil De- 
posits,’”’ 23, 26. 

Peak “production, Calif., ete., 150; five 
fields, 144; U. S., 140, 365-7. 

Pennsylvania, 26, 28, 32, 387, 42, 43, 62, 
63, 65, 145, 146-150, 298, 302, 368. (See 
also under ‘“Costs,’’ etc., chap. XIII; 
Bradford, McKean Co., and Philadel- 
phia.) 

Per capital consumption, 15, 191, produc- 
tion, 12 states, 147. 

Persia, 14, 19, 147. 

Perwt | Ae L9e 149 14791935198. 219-214': 
oil exports third in value 214. 

Per vehicle consumption, 110-111. 

Petroleum Iron Works, 275. 

Petroleum products, over 300, 57-58 (see 
Utilization, 94-100). 

Petrol. Register, 40 Rector St., N. Y., 350. 

“Petroleum: how to find it,’’ 380. 

Petroleum in So. Am. trade, 197. 

Petroleum trade, 1926, Br. & U. S., 368. 

Pew, J. Edgar, pres., A. P. I., 225; J. 
Howard, pres., Sun Oil Co., 356; J. H. 
Pew, Jr., 356. 

Pew, Pohn G., pres., Sun Dry Dock & 
Shipbuilding Co., 89, 173. 

Philadelphia, 20, 139, 355. 

Philippines, 44, 183. 

Phillips Petroleum Co., 304, 335, 354, 361. 

Pipe lines and pump stations, 51-4, 87-8, 
275, 303, 305. 

Prairie Oil & Gas Co., Prairie Pipe Line, 
see under companies (Standard, N. J.). 

Pittsburgh, Gulf Oil and Oil Well Supply, 
135, 188. 

Prevention of failure, 370, 3876; frauds, 
370; capital in Venez., 122, 355. 


INDEX 


Pre-war prices, 114. 

Policy, U. S., internat’l., 10-14, 178. 

Pools of 14 mil. bbls. or more, 366.. 

Ponca City, Marland, 282, 352. 

Potash salts, 30, 135. 

Port Arthur, Tex., 20, 185, 137, 139, 308, 

; $41. 

Portable refineries, 170; natural gasoline 
plants, 361. 

Potomac river, comparison, 61, 139. 

Potrero del Llano, 229, 230. 

Premiums. for better oils, T7-78, 

Prevention of failures, 375- 8; frauds, 381- 4, 

Price control of crude, 75; ‘factors in up- 
ward trend, 75-76; not determined. by 
cost, 316. q 

Prices, American versus foreign, 116, 
177; average, crude, 76, 317, 366; fuel 
oil, 938; gasoline, 114, 266-7; Beaumont 
or Spindle Top, 75-77; California, 77, 
88, 93; comparative refined, 93; crude 
and gasoline, 114, 366-7; staple prod- 
ucts, prewar and 1922, 114; danger of 
rise (Farish), 105; distress, 75-8, 90; 
export, gas and fuel oil, 181; high, 
crude, 76, 114; gasoline, 114; low, crude, 
76, 77; gasoline, 88, 90; Mid Continent, 
78, 102; Oklahoma, 93; Pennsylvania 
grade, 76; posted, 77; refined oils, 92- 
93; subnormal, 317; versus costs, 317; 
wildeatting relation, 359. 

Principles of investment, 362. 

Priority, income, 294; utilization, 95. 

Producers, Mexico, 237, U. S., 303. 

Producing areas, 5 large, compared, 144. 

Production: California, 142, 150, 154-156; 
domestic changes, 142, 366; by major 
fields, 141; major pools, 142, 3866; by 
states and countries (1924-1926), 147; 
tremendous gain in Texas, 366; Vene- 
zuela, 221; per well, 71, 148; world 
statistics, 1926, preliminary, 147. See 
chap. V. 

Profits, how determined, 334; net of 
leading operators, 335; net per share, 
336; ratio to par value, 337; see Net 
earnings. 

Protection of small investors. 381; of in- 
dustry against self, 259, 369. 

Pumping Jack, 146. 


Q 


Qualities of crude oils, 22; gravities, 39, 
142; Latin American crudes, 202; Mexi- 
ean, 225-226. 

Quartette of money makers—see Gulf, 
Humble, Standard (Ind.), The Texas Co. 

Questionniare, Better Business Bur., 383. 

Quickening in Latin America, 204. 


R 


Raft of reasons for failures, 374-6. 

Railway transport, 87; consumption, 96-98. 

Railway companies, comparative earnings, 
Baltimore & Ohio, N. Y. Central, Penn- 
sylvania, 367. 

Ranger (Eastland County) district, 164, 
166. 

Rapid finding and developing (see Smack- 
over and Wortham), 105. 

Rapid drilling, Shell Co., Calif., 51. 

Ratios, carbon to hydrogen in coal, 24; 
assets to capital stock; reserves to rate 
of removal, 19, 47. 

Reagan County, see Big Lake. 

Reasons for failures, 374-6. 

Recovery of oil from deposits, 42, 438, 72; 
products from crude, 60. 85, 86, 367. 

Redfield, A. H., 6, 206, 208. 

Reduction of risks, 378. 

Reed, Ralph J., see Lightning protection. 

Refineries, 55, 838, 87, 1387, 161, 170; Bar- 
naca-Bermeja, 216; British, 188, 189; 
California, 169; Los Angeles district, 


139, 170; New York or Bayonne. dist., 
139, 170;. Port Arthur, 139, 170, 341-2; 
principles in locating, 168; portable, 
Tampico, 242; world’s largest, 137, 368. 

Refiners, why so many fail, 376. 

Refining, cracking, 57, 60; growth of in- 
dustry, 83; more stabilizing than pro- 
ducing, 333; skimming or topping, 170; 
straight run, 54-57. 

Regulations, 245. 

Reid, W. A., trade adviser, Pan Am 
Union, 6. 

Reinholt, O. H., 31, 44, 51, 71, 312, 400. 

Rejuvenation, 41, 71. 

Relief train of gasoline, 112. 

Renting drillling tools, 312. 

Requa, Mark L., oil director, U. S. Fuel 
Administration, 76, 277, 300. 

Reserves, 19, 39, 255, 259, 262-3, 264-5. 

Restrictions, Americans abroad, 12-13; 
war-time consumption, 299. 

Return of capital, 321. 

Retrospect of years before 1926, 365. 

Review of recent years: (1928), 104-6; 
(1924-5), 304; (1925-6 and outlook for 
1927), 366-9. : : 

Review of Reviews, abstract of author’s 
article in The Eng. Mag., 48. 

Richardson, G. B., 6, 365. 

Richest tribe in the world, 252, 294-6; 
(financial importance of holdings), 311 
(see Osage County). 

Richest well, Abrams No. 1, 320. 

Rig and Reel, 48, 210, 212, 274, 286, 308, 
328, 345. 

Risks, reduction of, 378. 

Rittman, W. F., chemical engr., 280, 282. 

Ritz-Carlton Hotel, oil heating, 99. 

Roads financed by oil, 301. 

Rockefeller, John D., 5, 61, 87, 291. 

Rocky Mtn. field, 31, 36, 41, 141; market, 
116; “‘wreckage,”’ 372. 

Rocky Mtn. Petrol. Assn., 41. 

Ross, Victor, director, Imperial Oil, Ltd., 
author of “Evolution of the Oil Indus- 
try.72- 00 obs 

Rotary drilling, 50-1; electric drive, 308. 

Roxana Petroleum Corp., see Shell Union. 

Royal Bank of Canada, 219, 360. 

even Dutch-Shell, 12, 16, 1038, 290, 350, 

8. 

Rules of Hammond to avoid losses, 382. 

Russia; 7-9, 11, 145-155, 148; -10n 26.014 0-1 
147,°-1525- 177, 191-22, 1953 


s 


Salaries and wages, 307, 313. 

Salt.Creek field, 28, 70, 142-8, 145, 266, 345. 

Salt domes, 36, 40, 162; see Gulf Coast 
and Isthmian (Mex.) fields. 

Salt Lake or Sherman field, 29, 35. 

Salt water, 23, 41, 78, 228, 231. : 

Salvage of well equipment, 314. 

San Diego (Naval sta.), 21, 123, 127. 

San Francisco, 308. 

San Pedro, 29, 90, 188 (see Los Angeles). 

Sands, R. M., secy., Pan-Am. Western, 
352. 

Santa Fe Springs, 35, 51, 69, 71, 142-3, 
145, 376. 

Saturday Evening Post, 99, 295, 316, 373. 

Scandinavia, 187; see Norway, Den., Sw. 

Scherer, Jas. A: B., D.D., Calif. Inst. of 
Tech., 291. 

Schwab, E. A., Natl. Vigilance Com., 373. 

Scotland, 14, 16, 17, 188; see Shale oil. 

Securities, buying, 361-4; listed, 361-5; par 
value, common stock, 336. 

Security, 3 qualities, 362. 

Seismograph and torsional balance, 163. 

Seminole, leading field, 161, 366, 369. 

Seneca Oil Co., see E. L. Drake, 68. 

Senate, U. S., 103; Senator Cameron, 347. 

Service of great fortunes, 290. Sepeees 

Shale(s), 22, 28,.24,..42; — oil, 14, 17; 
— work, U. S. Geol. Survey, 255. 


INDEX 


Shells: Core of —Califin12,. 48,-51; 73.5. see 
Shell-Union, 350; and Royal Dutch-Shell- 

Shipments from Mexico, 238-9. : 

Shipping, 17, 20, 171; tankers, 90, 171. 

Shipping Board, U. S., 12, 89, 256. 

Shoup, Paul, Pacific Oil Co., 300. 

Shreveport, La., 135, 138. 

Siberia and Sakhalin, 19. 

Signal Hill, see Long Beach. 

Sinclair Consol. Oil Corp., 144, 294, 304. 

Skelly Oil Co. (Who’s who), 303-4, 336. 

Skimming and topping, 170, 241. 

Slosson, E. G., Science Service, 117. 

Smith. sGeo. On .U. Si Ge ».,. 61,93," 101, 
252, 261, 277, “Program of Profit,’’ 334. 

Smith, Phillip S., in Alaska, 254. 

Smith, Roland H., pres. Oklahoma Co., 
278; address before Oil Board, 359. 

Snow, C. D., U. S. Chamber of Com., 195. 

Snyder, Meredith P., banker and ex-mayor 
of Los Angeles (friend of author), 112. 

Soup-bone problem, refining, 84-5, 116. 

Sources, capital, 357; crude oil, 322; future 
supply, 119-21; imports, 200; income, 
832, 359. 

Specifications, gasoline, 59. 

Speculating vs. investing, 362-3. 

Sperling’s Journal, quoting E. M. Ed- 
gar, 18. 

Spindle Top, Jeff. Co., 40, 41, 145, 167, 366. 

Stabilizing, function of storage, 81, 322; 
influence of foreign trade, 66, 177; of 
associations, 92. 

Standardization, 66; A. P. I. com., 308. 

Standard Oil Companies: Assets, 346; con- 
trol, 103; dividends since dissolution, 
8388; div. rate on common, 338 5 do- 
mestic market(s), 103, 116; earnings, 
335; mergers, 329-31, 344; monopoly, 
103; net profits, 335, 367; share, foreign 
trade, 103; securities, 346; tanker fleet, 


ioe 

Standard Oil Co., 51, 115; Calif., 294, 303, 
830-1, 331, 333 ;—Ind., 343-6, 367; —N. J., 
10 bl, 645, (tankers), - 173, 178, -213; 
Visine Aca-o7 Lose Lolwea2o0, cha, uaos, 290, 
299, 304, 328, 335-8, 358, 367; 369 (see 
also Geo. H. Jones, The Lamp, W. C. 
Teagle; Carter, Humble,  Internat’l, 
Prairie and Transcontinental companies) ; 
—N. Y., 178, 304, 329, 331-2, 336-8, 367. 

Standards, Bur. of, see Dept. of Com. 

Starke, Eric A., 77. 

State Department, 12, 244, 255. 

Stewart, Lyman, pioneer, author’s first 
employer in the industry, 2, 291, 349. 

Stewart, Col. Robt. W., 282, 344, 346. 

Stockholders, number in 5 oil co’s., 294. 

Stocking’s, ‘“‘The Oil Industry, etc.,’’ 315. 

Stocks, crude, 81, 82, 104, 322, 366; fuel 
oil, 82, 367; gasoline, 82, 104, 111, 367; 
kerosene, 82, 3867; refined and _ semi- 
refined, 82, 322, 367; Standard Oil, 103. 

Stratigraphic distribution, 26, 28, 201, 211. 

Stone, Warren S., banker, 288. 

Struth, H. J., see Oil Trade, 305, 308. 

Success essential to industry, 301. 

Sudden need of new capital, 356. 

Suitability of securities, 362. 

DUNe OM COs 4 9 aa b04 ui So0-1.4 505.0 300; 
362. 

Sun Shipbuilding & Dry Dock Co., 174, 
355. 

Supply and demand, 72, 78, 81, 111, 321, 
3866-7; report, A. P. I. Committee of 
Eleven, 168. 

Supreme Court, 245. 

“Surface Signs of Oil Deposits,’’ by P. H. 
Pearson, Ph.D., Upsala, Colo., E. 
Orange, N. J., 25, 26. 

Sullivan Machinery Co., core drills, 46, 49. 

Sweden, 180, 182, 185, 186, 187. 

Swensondale Oil Co., 123. 

Swindell, Geo. M., ex-sec’y., Ch. of 
Mines & Oil. 


Swindling promotions, 372-9. 
Synoptical story of °8 states, 167. 


T 

Tampico, Mex., 21, 90, 135, 139, 239. 

Tanker, first built in ‘England, 88. ‘ 

Tanker fleet, function in war, 173; Ship- 
ping Board, 89, 256; U. S., 90, 171; 
world, 90. 

Tankers, company ownership, 345; pre- 
ponderance, 171. 

Taxable net income, 333, 340. 

Tax burden lightened, 322. 

NS Mex., 243-4; U. S., 19, 247-8, 

Taxpayers, important, 346. 

Teagle, Walter C., pres., Standard, N. J., 
LOG et 305926150269) ©3235" 3672 

Technologists, 40, 60, and Chap. XII; see 
also Bureau of Mines. 

Ten-year tale of tragedy, 372-3. 

Tertiary beds, chief source, Africa, Asia, 
26; Calif., 33; Europe, 26; Gulf Coast, 
28, 36; Mexico, 28, 225; Venezuela, 220. 

Texaco Star, The, 101, 110, 135, 146, 161, 
183,- 187, 1905 19725 1992208.) 2074232. 
238, 239, 246, 275, 289, 302, 308, 320, 
321, 335, 340, 341, 3438, 363. 

Texas Company, The, 41; (Japhet lease), 
70, 92, 107, 110, 304, ““A Type Study in 
Oil,” 338-348, 358; the chairman, 361; 
comparisons with Gulf, Humble and 
Standard of Indiana, 343-348; dividends, 
leading independent in payment of, 337, 
341, 344; earnings, 335, 340, 367; fur- 
ther financial information, 340-341; his- 
tory, 339; in Mexico, 237-239; officials, 
343; physical facts (production, etc.), 
339 ; reasons for selection, 338; reor- 
ganization, 343, 368; some leading stock- 
holders, 342; surveying pipe line, 27 5¢ 
See also Beaty, Cosgrove, Dennison, 
Holmes, Lapham, Lefevre, and The 
Texaco Star. 

Texas, 23,..24,-28,..80,,.32; 33, 36, 40, 41; 
62; (Corsicana-Powell), 69, 76, 178; 
(refineries shut down), 84, 138, 142, 
145, 150, 162, 168, 170; rancher, 123, 
359; tragedies, 372. 

Time to attain peak, Wortham, 165. 

Titusville, 1, 62, 63, 145; Iron Works, 204. 

Tonkawa, see Oil fields. 

Topila, Mexican field, 234. 

Topping or skimming plant, 170. 

Toteco-Cerro Azul, 234, 238. 

Total output, 5 fields to 1925, 160. 

Trade, domestic, 153; foreign, 195; mari- 
time, 171-200; Latin American, 195-200. 

Tragedies, 5, 7, 10, 28, 29, 72: (over- 
production), 79, 81, 105 369; (over- 
building) 135; (financial), 104-105, 305; 
ten-year tale, 372; tracing causes, 374; 
transportation, 87-88, 112, 305. 

Transcontinental Petroleum Co., 235. 

Transportation, 10, 51-4; (costs), 87-90, 
112, 171-3; The Texas Co.’s pipe lines 
and tankers, 339. 

Treasures, economic, 86, 94, 99, 100: finan- 
cial, see Assets, Dividends and Income: 
geographic, 135; governmental, 247; hu- 
man, 293; in dividends, 337; Mexican, 
242-3; mutual, 288. 

Trinidad, 14, 19. 96, 199, 200-1, 208, 206. 

Tulsa, 135-7; (West Tulsa) 139, 161, 170. 

Turkish petroleum, 8-11. 

Type study of a successful company, 338. 


U 


Union Oil Co. of Calif. and its Bulletin, i 
17, 39, 52, 53, 58, 80, 89, IZ 96.1 12" 
120, 304, 335-7, 349, 362, 364-5, 367, 376. 

Unique location of Los Angeles, 138. 

Unit cost of cable drilling, 313: core dril- 
ling, 311; rotary ($8-$25), 314. 


INDEX 


Unit development of a pool, 266-7. 

Cae coal mining and manufacturing, 
0 

United Kingdom, 15; petroleum trade, 
187-190, 868; foreign commerce, 195-6. 

United States, 5, 8, 10, 12, 15, 19, 90; 
production, 65, 140-1, 147, 365-9. 

U. S. Commerce Reports see Dept. of Com. 

ua S. Chamber of Commerce, see Cham- 
er. 

Unscrupulous promoter, 373. 

Uren, Lester C., prof. of petrol., Univer- 
sity of California, 325. ; 


Vv 


Vacuum Oil Co., 304, 335-338 (60th anni- 
versary), 368; Pres. Edward Prizer, 357, 

Value of commerce, 20; leading nations, 
195; 15 best customers, 196; relation of 
oil to total imports of Latin Am. from 
U. S., 198; U. K. imports of petroleum, 
187. 

Value of mineral output, 638, 148-9. 

Value of petroleum, agricultural, 20; 
crude, 65, 319-20; comparative, 97; eco- 
nomic, 57, 61; exports, 179, 368; export 

- trade, 177; governmental, 245, 247; nat- 
ural gasoline, 150, 158, 3860-1; imports 
from Mexico, 242; world trade of lead- 
ing nations, 195. 

Valuation of oil land, 318-20; assessed, 
820; barrel-day method, 319; various 
methods, 319. 

Values of oil properties, 319-20; definition, 
318; royalty interest, 320; specific, 
319-20. 

Van der Gracht, geologist, 44, 281. 

Van Dyke, dean of oil men, 298, 355. 

Van Nostrand, D., Co., Ine., 360. 

Veatch, A. C., geologist, 254. 

Venango County, Pa., 145, 146. 
Venezuela, 10, 11, 14, 19, 140, 147, 191, 
220-3, 869; American operators, 222. 
Ventura (Ave.), Calif., 151, 155; Consoli- 

dated Oil fields. 

Vernon (Calif.) refinery, 139, 170. 

Vinton pool, 70, 1638, 164, 167. 

Voleanic arch, W. Va., 65; necks or plugs, 
Mexico, 202, 225, 227; origin, 22. 


WwW 


Wage earners, number producing, 272; re- 
fining, 83; treatment by employers, 243, 
285. 

Wages and salaries not excessive, 307. 

Wage scale for oil-field workers, 313. 

Waid, Wm. Ash, Osage oil inspector, 295. 

Waley-Cohen, Sir Robt., director, Shell 
Union, “Economics of the Oil Ind.,’”’ 316. 

Wall Street Journal, 8, 16, 77, 90, 106, 
L5Ge LOL: 16455 220 224 OA OS eos 
294; see also chap. XIII. 


War factor, 59, 247, 298; prices, 299; ac- 


tivities, Petrol. Committee, 298. 

Warnings to investors, 30, 59, 316, 369; 
see also Chapter XIV. 

Washington, or D. C., 6, 127, 247, 257. 

Wastes, causes, 100-1, 124, 324; economic, 
66, 72, 74, 100, 121; financial, 43, 301, 
324. See Financial losses and conserva- 
tion. 

Water drive or flooding, 72, 366; emulsion, 
52; exclusion, 40-42; function, in origin 
and natural storage, 23; intrusion into 
oil sands, see Salt water; in rotary drill- 
ing (with mud), 51; separation, 52; 
transportation, 88-90, 171; works system 
compared, 53. 


Waverly Handbook, 54, 120. 

baa R. L., A. P. L., 1038; Welliver, J. C., 

Wells, average depth, 72, 105, 232; deep, 
30, 48, 51, 738, 155-6, 167, 309, 3869; 
number, 72, 148; profitable, 229-30, 320; 
see Yield per value. 

West Indies wanting in oil, 207. 

Westinghouse Electric & Mfg. Co., 309; 
see Cope and Dralle. 

West Virginia, 28, 30, 37, 157-9, 302. 

Wheeler Ridge, Calif., 64, 360. : 

White, David, ex-chief geol., U. S. Geol. 
Survey;.7,° 12; 19; 26, 256-231. 

White, Edward, statistician, I. T. U., 248. 

White, Israel C., 30, 64, 65, 229. 

Who’s who in oildom, 303. 

Why independent refiners fail, 376. 

Why rogues prey on petroleum, 371. 

Wichita County, Tex., 164. 

La ae Kan., 188; Wichita Falls, Tex., 

Wickett, F. H., chairman; Pan Am. Pi & 
Tea 82e 

Wiibnrcad County, Tex., 164. 

Wildcatters, 277-8, 378; see Benedum, Do- 
heny, Esperson, Humphreys, Slick, Smith. 

Wildcatting, basis for industry, 277-8; how 
to win at, 378-80 ; wastes in, 48, 311, 380. 

Wiltbank, H. C., ex-ed., Our Merchant 
Marine, 171. 

Winchester, Dean E., U. S. G. S., 255. 

Work, Dr. Hubert, Secy. of Interior, 14, 
130, 252; Chairman of Oil Board, 130, 
248, 261, 264. 

Working ao definition of, see The 
Texas Co. (current assets minus current 
liabilities), 343. 

World, Assoc. Advertising Clubs ‘of, 106; 
— National Vigilance Committee now 
es Better Business Bureau Incorp., 
83. 

World commerce, 195; consumption, 191- 
192; United States, 176, 179; geology, 
26; production from Tertiary, 26; pro- 
duction by countries, 14, 147; relations, 
see International, 7-18; reserves, Jan. 1, 
1924, 19; share of U. S., 14, 26, 140-1; 
and Mex., 233. 

Worth of crude oil at the well, 317. 

Worth, distinction between gross and net, 
Site 

Wortham, Freestone Co., Tex., 165. 

Wrather, W. E., geologist, 276. 

Wright, Chas C., poet, 64. 


Y 


Yield per acre, 70 (see Spindle Top, 
1926-7); bond, percent, 362; crude oil 
per day (U. S.), 71-72, 104, 148, 867; 
(Mex.), 236; per capita by states, 147; 
per square mile of state areas, 147; per 
well, 71. See also output, production, 
recovery. 

Yield of alcohol, 119; benzol, 120; shale 
Oil, 121 

Young, Arthur N., State Dept., 255. 

Young County, Tex., 32. 


Z 


Zacomiztle, Mex , 231, 234f, 286. 
Ziegler’s ‘‘Popular Oil Geology,’’ 24, 68. 


“OILDOM: ITS TREASURES AND TRAGEDIES” is. for sale by the 


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COMMENTS OF CRITICS ON PART ONE 


Very interesting.—Col. John C. Coolidge, of Plymouth, Vt. 

A valuable piece of work.—President Hunt, Bucknell University. 

Compact and comprehensive.—Joel Swenson, Journalist, New York. 

A lot of good stuff in it—Senator Capper, of Kansas. 

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chusetts Institute of Technology. 

Of considerable use to the general public—A. A. McCurdy, Editor, The 
Ou Trade, New York. 

Much ground covered. * * * A good and workmanlike contribution to 
popular knowledge.—London (England) Oil News. 

An excellent review of the big things performed by the oil industry.— 
Editor Turnbull in The Derrick, Oil City, Pa. 

Tremendously condensed; a mine of information.—Chas. E. Bowles, 
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A fair-minded story of the petroleum industry. Should be read by every 
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Please ship five copies (of Part One) (January 29). Please ship 25 
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ing, University of Oklahoma. 

The text covers a wide field, of value to the petroleum world and all 
interested in any way in this industry.—W. W. Orcutt, Vice-President, 
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I have enjoyed looking through the book and find it filled with data -on 
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A valuable reference volume, written in a very readable style, free from 
technicalities. Its object is to show the public the benefits resulting from 
the development of our oil resources and to avert financial tragedies.—Oil 
Bulletin Official Organ of the California Chamber of Mines and Oil. 

This book tells how oil is formed, where it lurks within the earth, how it 
gets to the surface and leaves its signs, how it is piped and refined, sold and 
distributed and often woefully wasted. A sound business spirit pervades 
the volume now issued. A decided human outlook, often with droll humor, 
is another characteristic of Mr. Reinholt’s book. =P H. Pearson, Ph. D., 
author of many books and formerly with the U. S. Bureau of Education. 


WHO THE AUTHOR IS 

Oscar Halvorsen Reinholt (B.S., St. Olaf Col., mining at Univ. of Minn., economics and 
geology at Univ. of Wis.) ; of Norse-Scotch ancestry, native of Wis.; kept books at 15, taught 
at 16 and became asst. mine supt. at 21; mapped the Mesabi iron range for the Minn. Geol. 
Survey, 1898-9; geographer, Philippine Forestry Bureau, 1902-3, and Supt., U. S. Army coal 
mines, 1903-4; ‘with Union Oil Co., 1910, after placing California on the cement map through 
core drilling ; with U. S. Bureau of Mines, Pittsburgh, 1911-12; War Minerals work, 1917-18: 
with U. S. Treasury Dept., 1920-23, as } haw ah: E il, Gas, ete.; Bronze and 
Silver Medals, World’s Fair, St. Lo ein cdie Alo: -Calif. Exposition, 1916; 
Chief, Mines & Metallurgy, World’s racter-Translator, Am. Chem. Society, 
1912, Educator at various times, Lec etroleum, etc., and contributor to many period- 
icals ; article in The Engineering Mecarine bstr, ected pea 40H RHEyicw of Reviews, Feb., 1906; 
prepared Part V on Mexican oil fields fo Seah of the Oil and Gas Industry,” 
U. S. Bureau of Internal Revenue, 1921 ; led and field work performed in Mexico 
and many oil states. (See the various ““Who’ s Who” in AT LIND Capital, Engineering, 


and the Pacific Southwest (1913)). UNIV ERSITY OF ILL 


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